(Kitco News) - The gold market has seen a solid breakout, with prices pushing back above $4,200. However, signs of renewed investor interest began to emerge in July as investors slowly returned to gold-backed exchange-traded funds, according to the latest data from the World Gold Council.
In its monthly ETF report, analysts at the WGC said Thursday that global gold ETFs saw holdings increase by 23.5 tonnes, valued at $2.965 billion. The analysts said European-listed ETFs drove inflows last month, helping to reverse two months of outflows.
“Inflows were broad-based, with all regions contributing, led by European-listed funds,” the analysts said. “Y-t-d, global gold ETF inflows amounted to US$11bn, equivalent to a 39t increase in holdings. Asian-listed funds remained the largest contributor to global inflows over the period, followed by Europe. North America, meanwhile, remains in net outflow territory.”
The analysts said ETF demand reflects investors taking tactical advantage of lower gold prices to add diversification to their portfolios.
“Following substantial June redemptions and several months of falling gold prices, some investors may have viewed prices near US$4,000/oz as an attractive re-entry point. Gold ended its four-month losing streak in July, gaining approximately 2%,” the analysts said.
Looking at regional flows, North American-listed products saw their holdings increase by 0.3 tonnes, valued at just $71 million. Analysts said the modest inflows represented only a tentative recovery.
“Inflows were insufficient to materially reduce the region's y-t-d deficit, leaving North America as the only region still in net outflow territory,” the analysts said.
However, demand from European investors remained strong through the early summer months. Analysts said European ETFs saw inflows of 17.3 tonnes, valued at $2 billion. The WGC said this was the second-strongest month for inflows so far this year.
“Buying was broad-based but led by the UK (+US$875mn) and Switzerland (+US$657mn). Y-t-d, each market has now attracted more than US$2bn, or roughly US$5bn combined,” the analysts said. “European investors appear to have rebuilt positions following June's sell-off, using lower prices as an opportunity to re-enter the market. This mirrors the pattern seen earlier in the year, when European funds led the rebound following March's sharp US-led outflows, suggesting investors were willing to add exposure after periods of market weakness.”
Although Asian demand slowed in July, analysts said the region's activity reinforced its position as the largest contributor to global inflows. Asian-listed ETFs saw inflows of 4.8 tonnes, valued at $616 million.
“China led the gains as safe-haven demand strengthened, with the CSI 300 Stock Index recording its worst month since January 2016, while falling local yields reduced the opportunity cost of holding gold. A stabilizing gold price also encouraged allocation. Japanese-listed funds continued to see outflows as rising local yields diverted investor demand, while Indian funds saw modest inflows of US$157mn,” the analysts said.
