Global gold ETFs eke out net inflows in June as prices dropped nearly 7% - WGC
New York (July 8) - June was gold's worst month in nearly five years, with the price dropping nearly 7% after the Federal Reserve signaled that it sees the possibility of higher interest rates within two years.
However, the latest data from the World Gold Council (WGC) shows that some investors saw a tactical opportunity to jump into the gold market as prices declined sharply. The WGC said that global gold-backed exchange-traded products saw their holdings increase by 2.9 tonnes last month.
"Inflows into North American and Asian funds were primarily offset by outflows from European funds," analysts at the WGC said in the report. "Overall, the positive flows came in spite of significant gold price weakness in the latter half of the month on the heels of a relatively hawkish Federal Reserve (Fed) outlook, suggesting that investors may have taken advantage of the lower price level to gain long gold exposure."
Reflecting gold's year-to-day price declines, the WGC said that global holding as of the end of June totaled 3,624t, down about 7% from the October 2020 record tonnage high of 3,909t. The value of gold held in ETF vaults totaled $206 billion.
Although June managed to see a slight positive gain, the report noted that investment demand for the precious metal was relatively week during the first half of 2021.
"Global gold ETFs lost nearly $7 billion in the first half of 2021, as inflows in Q2 could not overcome steep outflows in Q1 when gold prices fell by 10%," the analysts said.
However, despite the struggles in the first half of the year, the WGC remains positive that gold will find some support in the second half.
"The current macroeconomic environment, as well as anecdotal evidence, indicates remaining upside potential for gold investment this year," the analysts said.
The council noted that although markets were spooked by the potential for a rate hike two years from now, monetary policy remains extremely accommodative and that should continue to support gold prices through the rest of 2021.
In a media presentation Thursday, Juan Carlos Artigas, head of research at the WGC, said that he expects central banks to be very cautious when changing the current trajectory of monetary policy, and that will provide some support to the gold price.
"Short term, rising rates have created a big of a headwind for gold, but historically, rates are still extremely low," he said.
Looking at regional demand for gold, North America led the way last month, with the region seeing inflows of 10.5 tonnes. However, European-listed funds saw outflows of 9.4 tonnes.
The WGC also noted continued growth in the Asian ETF market, which saw inflows of 2.3 tonnes.
Another trend the WGC noted in the gold market is the growing popularity of low-cost gold-backed ETFs.
"Low-cost ETFs, with combined holdings of 185 tonnes, now represent 5% of the total global gold ETF market," the analysts said.
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