Net outflows from gold-backed exchange-traded funds (ETFs) sped up again in August following a cooldown the previous month, latest data from the World Gold Council (WGC) has shown.
Global ETFs backed by physical metal experienced outflows 46 tonnes last month, equivalent to some $2.5 billion. This was the third month on the spin that net outflows have been recorded, and up from the 34-tonne outflow reported in July.
Total holdings across these funds finished the month at 3,341 tonnes, while assets under management (AUMs) dropped to $209 billion.
The WGC said that “[gold price] weakness, especially during the first three weeks, was likely the main driver of the outflows in August.” Bullion values slipped 1% during the course of the month, to below $1,950 per ounce, as yields on US Treasuries increased.
Europe and North America Decline Again
In the first eight months of 2023, gold ETFs recorded net outflows of $7.5 billion, the WGC said. Total holdings fell by 130 tonnes over the period.
European ETFs have contributed the most to year to date outflows, the body noted. Liquidations in the UK and Germany meant that these funds’ outflows amounted to $5.8 billion or 96 tonnes.
And the region — along with North America — led outflows again in August.
Funds in Europe witnessed net monthly outflows of $315 million, or eight tonnes, last month. This took AUMs and total holdings to $92 billion and 1,471 tonnes respectively.
The body said that 35% of the reversal “came from FX-hedged products as the local currency fluctuated.” It added that “the rest can be largely attributed to rising interest rate expectations as the region’s inflation remained stubbornly high.”
In North America, net monthly outflows hit 44 tonnes or $2.7 billion in August. This was the largest decline since for 11 months as yields on government bonds headed northwards.
The WGC said that “as the US economy continues to defy recession expectations, with resilience in household consumption, the 10-year Treasury yield rose further.”
It added that “Fed Chair [Jerome] Powell’s remarks at Jackson Hole further firmed investors’ belief that rates are going to stay higher for longer, reducing gold’s allure as the opportunity cost climbs.”
August’s reversal meant that demand for North American funds turned negative for the year to date. Holdings dropped 41 tonnes to 1,684 tonnes, while AUMs dropped by $2.1 billion to $105 billion.
Asian Buying Bucks The Trend
Elsewhere, buying across Asian funds remained lively and net holdings rose for their sixth successive month in August.
ETFs in the region attracted 7 more tonnes, taking total holdings to 128 tonnes. AUMs meanwhile increased to $8 billion, up $430 million month on month.
This means that Asia is the only region which attracted positive inflows between January and August. AUMs rose by $608 million, while holdings increased by nine tonnes, driven by strong buying in China and Japan.
The WGC said that “poor local equity market performance and the depreciating renminbi drove [Chinese] investors to safer assets such as gold” last month. Fund AUMs there rose by $293 million while holdings nudged five tonnes higher.
On Tuesday, the WGC said that central banks added 55 tonnes of the precious metal to their holdings in July.
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