Physically backed gold ETFs registered $2.3 billion net outflows globally in July, equivalent to a 34-tonne reduction in holdings, according to data from the World Gold Council.

Rising interest rates continued to impact demand for gold ETFs in July.

Despite the low demand, total assets under management within gold ETFs increased by 2% month-on-month to $215bn as a rebound in the gold price more than offset negative flows – the price of bullion rose nearly 2.5% in July from $1,919/oz. to $1,966/oz.

The higher gold price helped moderate gold ETF outflows which were 39% lower in July compared to June.

According to the World Gold Council, although the US Federal Reserve increased its key rate by another 0.25% in July, softening inflation data is driving investors’ expectations that the current tightening cycle will end soon.

While such expectations should support the gold price, the World Gold Council believes that they are also leading to greater risk-on sentiment and a rally in equities which may be diverting investment somewhat away from gold.

Overall, gold ETFs globally have recorded year-to-date outflows of $4.9bn as of the end of July, a cumulative reduction of 84t in holdings.

Regional highlights

Gold ETFs listed in North America experienced their second consecutive month of outflows in July although the $986 million in recorded net redemptions was notably lower than those in June (-$2bn). The region’s largest gold ETFs endured the heaviest losses in July with the SPDR Gold Shares (-$536m) and iShares Gold Trust (-$272m) leading outflows.

Despite recent outflows, year-to-date demand for North American gold ETFs remains positive at $567m (+4t).

European gold ETFs led global outflows in July, shedding $1.3bn (-18t), as the European Central Bank and the Bank of England lifted their policy rates to multi-decade highs in a bid to tame the region’s stubborn inflation. With investors expecting further rate hikes ahead, the World Gold Council notes that interest in gold ETFs remains tepid in the region. UK-listed gold ETFs continued to see the bulk of outflows during July with the iShares Physical Gold ETC recording net redemptions of $453m.

Year-to-date, Europe has registered net outflows of $5.5bn (-87t), far outstripping inflows elsewhere in the world. The majority of outflows came from UK-listed gold funds which have shed $2.7bn.

Asian gold ETFs registered another month of net inflows, gaining $132m (+2t) in July as inflows into Japan-listed gold ETFs outweighed outflows from Chinese funds.