Investments in physically-backed gold exchange-traded funds (ETFs) turned negative last week after rising for two consecutive weeks, according to data from the World Gold Council (WGC). For every $1 that was invested, there were more than double the exits during the week, with North American investors leading the trend. The WGC data showed that investments in gold ETFs in the past week were $1.21 billion, while investors took out $2.65 billion. This marks a significant reversal from the positive momentum that had been building in recent weeks, with markets remaining in a phase of repeated repricing driven by news flow.
Investors in North America chose to quit, with outflows reaching $2.11 billion. Europe witnessed inflows of $0.56 billion and Asia recorded inflows of $0.90 billion. Country-wise, investors in the US booked profits valued at $2.23 billion, while the UK topped with inflows into ETFs at $0.34 billion. Germany, Canada, and China also witnessed inflows of $0.13 billion, $0.12 billion, and $0.08 billion respectively. Year-to-date ETF inflows were $18.84 billion, down from $20.28 billion in the previous week. The geopolitical standoff continues to support inflation expectations to some extent, while sustained central bank gold buying provides medium-term support.
Asians maintained their positive stance on gold ETFs, with net investments up at $15.02 billion compared with $14.92 billion a week ago. Europe also recorded positive inflows at $3.49 billion. However, there were outflows of $0.05 billion in North America, a significant drop from $2.06 billion net inflows a week ago. India and China continue to top ETF inflows at $3.26 billion and $9.12 billion respectively, while the UK, Switzerland, and Japan recorded net positive investments of $1.8 billion, $2.02 billion, and $1.26 billion respectively. In the absence of substantive progress in geopolitical conflicts, gold continues to trade within a range-bound structure.
Currently, gold is ruling at $4,699.50 an ounce on COMEX, with June futures quoted at $4,713.56. In India, spot gold in Mumbai ended at ₹1,51,186 per 10 g against ₹1,51,479 during the weekend. On MCX, gold June contracts ruled at ₹1,52,033 per 10 g. The trend in gold ETFs has been in sync with the drop in gold prices from the record high of $5,608 an ounce on January 29, with the yellow metal declining by over 15% since then. Gold prices more than doubled in their sparkling run from 2024 due to geopolitical crisis, tariff war between the US and other nations, and hopes of central bank interest rate cuts.
According to experts, the negative investment in gold ETFs was primarily driven by investors being caught between geopolitical support and strong macroeconomic headwinds in the US. After the Iran war, investors have chosen to exit on rising dollar, yield rates and fears of banks raising interest rates to tackle inflation. A surge in crude oil prices has led to investors exiting the yellow metal and investing in fossil fuel counters. The repeated swings in geopolitical headlines continue to be the key driver of short-term volatility, leaving prices largely event-driven and lacking a clear directional trend. Markets are focused on developments in US–Iran negotiations and major central bank meetings, including the Federal Reserve, with any marginal shift in geopolitical developments or policy tone serving as key catalysts for gold's next directional move.
