Global gold-backed ETFs record net outflow of $4.5bn in July: WGC

New data released by World Gold Council revealed that global gold-backed ETFs recorded net outflows of $4.5bn in July, as continued US dollar strength and softer inflation expectations weighed on investment activity.

Though it was the third consecutive month of outflows, July marked the largest monthly outflow since March 2021, with total holdings remaining 5 per cent higher year-to-date at 3,708 tonnes (valued at $209bn).

Following a 75 basis point rate increase by the Fed, which helped propel the dollar index to a 20-year high, and a late-month rebound in equities, tactical North American investors were encouraged to shift into riskier assets. As a result, North American funds accounted for the majority of gold-backed ETF outflows (-$2.8bn, 2.5 per cent) and gold fell 3.5 per cent in July, ending the month at $1,753/oz.

Key monthly ETF report highlights include:

• North American funds: decreased by $2.8bn (2.5 per cent assets under management, or AUM), driven by the largest and most liquid US funds
• European funds: down $2.1bn (2.2 per cent AUM), after the EU raised rates for the first time in 11 years
• Asian funds: recorded $446m (6 per cent AUM) in inflows, as safe-haven demand increased amid a 7 per cent fall in the CSI300 stock index
• Gold daily trading averages rose to $151bn in July, above 2021’s average level of $131bn

Adam Perlaky, a senior analyst at World Gold Council, said: “Significant outflows from global gold ETFs and a decline in gold futures positioning, which reached net short for only the fifth time since 2006, weighed on gold’s performance throughout July. Gold also faced headwinds in the form of a stronger US dollar, weaker Brent crude prices following softer growth data and lower implied volatility.”

He added: “Looking forward, expectations of less hawkish US monetary policy and high investor cash allocations may weaken the dollar, resulting in a sustainable recovery in equities and commodities. An analysis of gold futures positioning also suggests that gold could rebound in the near term.

“While it is rare for gold futures to reach a net short, they have historically been associated with positive gold returns going forward. For example, over a three-month period, gold returns have been positive 88 per cent of the time, with this figure rising to 95 per cent and 100 per cent on a six-month and 12-month forward basis, respectively.”

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