Gold ETF outflows grind on in February

Mar 9th, 2023 | By | Category: Commodities

Gold ETFs globally registered their tenth consecutive month of net outflows in February, shedding an additional $1.7 billion (-34 tonnes; -1.0% AUM) during the month.

Gold ETF outflows grind on in February

Gold ETFs globally have recorded ten consecutive months of net outflows as of February 2023.

According to data from the World Gold Council, the consistent outflows represent the longest streak of depressed demand for gold ETFs since January 2014.

Recent months have seen investors pull $1.6bn from gold ETFs in January, $534 million in December, and $1.8bn in November.

In a strong sign of low appetite for gold exposure, low-cost gold ETFs, which historically have often bucked wider outflow trends, also recorded their eighth consecutive month of net redemptions in February.

The WGC notes that gold ETF investors were likely further discouraged from investing in February due to a strengthening US dollar and rising yields which led to a 5% decline in the gold price during the month.

Outflows were widespread during February with net redemptions recorded in each of the three main geographic regions worldwide.

North American gold ETFs lost $547m (-10t, -0.6% AUM), their first monthly outflow in 2023 after two consecutive months of inflows. The WGC highlights that appetite for gold exposure in the region likely waned as US inflation pressure unexpectedly intensified, leading investors to anticipate higher interest rates for longer. The iShares Gold Trust (IAU US) saw the largest outflows for the region, and the second-largest globally, shedding $418m (-7t, -1.6% AUM)

European gold ETFs continued to drive the majority of global outflows, however, as the region’s central banks kept delivering outsized rate hikes. Gold ETFs across the continent saw total net outflows of $1.2bn (-25t, -1.7% AUM) in February, although these outflows represented a slowdown compared to the previous month (-$2.1bn). UK-listed gold ETFs once again made up the bulk of the region’s outflows with $740m net redemptions – the Invesco Physical Gold ETC (SGLD LN) led the way by losing $474m (-8t, -3.3% AUM).

Finally, gold ETFs listed in Asia registered marginal outflows of just $4m (-0.1t, -0.1% AUM) during the month. Inflows into Japan-listed products (+$17m, +0.3t) were outweighed by outflows from funds listed in China (-$45m, -0.7t).

Overall, gold ETF assets under management globally declined by 6.0% during February, ending the month at approximately $200bn.

Going forward, the World Gold Council has highlighted that gold’s performance in 2023 will likely be driven primarily by the interplay between inflation and central bank intervention. A mixture of headwinds and tailwinds exists, resulting in a highly uncertain outlook for the year and leaving room for the possibility of extreme outcomes.

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