Gold ETFs registered their eighth consecutive month of net redemptions in December, although outflows were significantly reduced and flow trends in recent months suggest a turnaround in demand in early 2023.
Rising interest rates weighed heavily on demand for gold ETFs in 2022.
According to data from the World Gold Council, gold ETFs globally experienced net outflows of -$534 million (-4 tonnes) in December.
Outflows have slowed over the past few months, however, with investors pulling -$1.8 billion (-34t) from gold ETFs in November, -59t in October, and -95t in September.
The World Gold Council notes that demand for gold exposure is being revived due to a turnaround in the price of gold which rose 3% during the month of December.
Examining the regional flows into gold ETFs in December, the World Gold Council points out that demand for gold ETFs listed in North America was actually positive (9t, $532m) for the first time since April. This was the main bright spot, however, with Europe-listed gold ETFs shedding -14t (-$1bn) and Asia-listed funds registering a marginal increase of just 0.8t ($45m).
Despite consistent monthly net outflows in the second half of the year, gold ETFs saw relatively muted net redemptions of -$3bn over the whole of 2022, equivalent to a decline in holdings of -110t (-3% year-on-year). According to the World Gold Council, this reflects an interesting year for gold ETFs in which demand surged during the first four months as geopolitical risk took centre stage before steadily giving back these gains as aggressive rate hikes dominated the narrative. At the end of 2022, global gold ETF assets under management stood at $203bn (3,473t).
Gold ETFs listed in North America and Asia saw demand falter more significantly than their European counterparts in 2022. North American funds registered net outflows of -$3bn (-75t) during the year, led primarily by the two largest and most liquid funds: the SPDR Gold Trust experienced net redemptions of -58t (-$2bn), while the iShares Gold Trust lost -42t (-$2bn).
In Europe, total gold ETF demand remained positive until November but ultimately ended -15t (-$943m) lower for the year. The World Gold Council attributes the relative resilience of European demand for gold exposure to the region’s closer proximity to the Russia-Ukraine war and deeper concerns over the outlook for economic growth.
In Europe, the UK-listed WisdomTree Physical Swiss Gold (-16t,-$994m) and WisdomTree Physical Gold (-14t, -$767m) registered the largest net outflows, while the German-listed Xtrackers Physical Gold (-8t,-$477m) and Xetra-Gold (-7t, -$315m) also saw declines.
Asian funds saw negative demand of -$1bn (-21t) in 2022 as a substantial fall in Chinese funds’ gold holdings was partially offset by demand for Japanese and Indian funds. Funds in other regions saw a fractional rise of 0.2t in holdings over the year.
Low-cost gold ETFs seemed to buck the net outflow trend over the year, however, collectively garnering 48t worth of net new assets during 2022.
Going forward, the World Gold Council believes gold’s performance will continue to be driven by the interplay between inflation and central bank intervention. A mixture of headwinds and tailwinds implies gold’s performance in the next twelve months could be similar to that of 2022: stable with a positive bias. The organization notes, however, that the outlook remains highly uncertain, leaving room for the possibility of more extreme outcomes.