World Gold Council: Surge in Gold ETF Outflows

The World Gold Council’s monthly insights are out.

During September, Gold’s value fluctuated between US$1,900 and US$1,950, before dropping to US$1,871 towards the end. This downward trajectory was influenced by a robust U.S. dollar.

The Gold Return Attribution Model (GRAM) analysis suggests that if opportunity costs surge, as seen with the U.S. 10-year yield’s near 50 basis points rise, gold might face challenges. The DXY rose 2.5% in September. External dynamics, such as U.S. economic indicators and shifts in the Chinese domestic gold price also played pivotal roles.

On the Gold ETF front, physically-backed gold ETFs have been experiencing outflows, as indicated by September’s data from the World Gold Council (WGC). There were contrasting trends in North America/ Europe vs Asia.

• September marked the fourth consecutive month of net outflows for these funds.
• Outflows for the month reached 59 tonnes ($3.2 billion), an increase from August’s 46 tonnes ($2.5 billion).
• By month’s end, total assets under management (AUMs) in global ETFs fell to $198 billion, further impacted by a 4% drop in gold price.
• By September’s end, global funds held 3,282 tonnes of gold.
• In Q3, gold ETFs experienced net outflows of 139 tonnes ($8 billion). Total global outflows for 2023 stand at 189 tonnes ($11 billion).
• North America’s gold ETFs reported a $2.1 billion outflow (35 tonnes) in September, marking four consecutive months of decline. Contributing factors include higher Treasury yields and a stronger dollar. Total North American holdings were 1,648 tonnes with AUM decreasing to $99 billion.
• European gold ETFs reported their fourth consecutive monthly outflow. They experienced a decrease of 28 tonnes, with total holdings at 1,443 tonnes and AUMs decreasing by $1.4 billion to $87 billion. Key reasons include actions and statements by the European Central Bank and the Bank of England.
• Contrarily, Asian funds reported net inflows for the seventh straight month in September, with an increase of 5 tonnes ($299 million). Factors include China’s promotional activities, rising local gold prices, and the declining value of local assets. Total holdings for Asia’s gold ETFs were 133 tonnes at the month’s end, with AUM increasing to $8.4 billion.

Projecting ahead there could be short-term turbulence for gold due to rising real yields and a solid U.S. economy. However, this may not necessarily spell a lasting slump for Gold. Persistent interest from central banks and underlying long-term macro factors could provide the necessary buffer. According to the World Gold Council, this spells potential gold buying opportunities, especially if market trends veer towards over-shorting. For example: The recent Hamas terrorist attacks resulted in a significant Gold Price increase.