Overall, gold demand in 2021 flourished and was a solid 10 per cent higher than in the record year 2020. The gold price also hit an all-time high. Gold funds and physically backed ETCs, on the other hand, recorded net outflows of 5 per cent, i.e. 173 tonnes of gold. Is this an indication of waning interest in the asset class? Only at first glance. A closer look at the development of gold ETFs and ETCs in recent years shows that the opposite is true.
Gold holdings increased by 2.200 tonnes since 2016
Recently published World Gold Council data shows that global gold holdings in gold funds and gold-backed ETCs have increased by 2,200 tonnes over the past five years to currently just over 4,000 tonnes. A look at regional developments shows that demand for European gold-backed ETCs has been very stable over the years, while inflows and outflows in US-based gold funds varied significantly over time. The same is true for gold funds in China and India, which recorded heavy inflows in recent years. However, due to regional developments, net outflows are also common – as most recently in January 2022.
US gold funds again top the list of global inflows in January
Early 2022 was marked by the strongest growth in global gold holdings in ETFs and gold-backed ETCs since May 2021. Especially in the US, gold funds celebrated a comeback with net inflows of 49 tonnes. This was fuelled by the unexpectedly high national inflation rate and the geopolitical crisis regarding Ukraine, which is currently keeping the world in suspense. The upcoming interest rate hike, on the other hand, is most likely already largely priced in on the stock markets. This is suggested by a recent World Gold Council study, which analyses the performance of gold versus US stocks and the US dollar prior to and following Fed interest rate hikes over the last 28 years.