Highlights:
- Gold ETFs inflows surge by $3 billion in January, driven by political uncertainties in Europe and weak equity markets in the Indian subcontinent.
- European funds led the way with $3.4 billion in inflows, the highest since March 2022.
- Indian gold ETFs witnessed record inflows of $400 million.
- Gold price strength and shifting market conditions, including political instability, fuel demand for safe-haven assets.
- Global AUM for gold ETFs reaches a record $294 billion by the end of January.
January Sees Surge in Gold ETF Inflows on Political Turmoil and Market Weakness
Gold exchange-traded funds (ETFs), backed by physical gold, witnessed impressive net inflows of $3 billion in January, driven largely by political uncertainties in Europe and the weak equity markets in the Indian subcontinent. According to the World Gold Council (WGC), European funds were the primary contributors, with a net inflow of $3.4 billion, the highest since March 2022.
The WGC noted, “Despite gold’s strong performance, North American investors remained net sellers of gold ETFs, while Asia and other regions saw limited inflows.”
The total assets under management (AUM) of gold-backed ETFs reached a record-breaking $294 billion by the end of January, continuing its upward trajectory as gold holdings rebounded by 34 tonnes. The Indian gold ETF market also experienced a record surge, with $400 million flowing into local funds, largely driven by investors seeking to hedge against ongoing global uncertainty.
Europe Leads Inflows, Asia Experiences Mixed Trends
While European countries dominated the gold ETF inflows, particularly the UK and Germany, China experienced notable outflows. The report highlights that political uncertainties in Germany, alongside economic concerns such as a pessimistic growth outlook and risks linked to US trade policies, significantly increased the demand for gold as a safe-haven asset.
In the UK, reduced bond yields, driven by soft inflation and economic data, created a favorable environment for investors to turn to gold ETFs. Similarly, France experienced inflows as local investors sought refuge from political instability and weak growth prospects.
Global Equity Market Volatility Drives Gold Demand
The WGC noted that equity markets were particularly “rattled” in January, with large selloffs in the tech sector and uncertainties surrounding President Trump’s inauguration. These events, coupled with concerns over tariffs, interest rates, and dollar movements, pushed investors towards gold.
As a result, gold trading volumes averaged $264 billion/day, reflecting a 20% increase month-on-month. COMEX experienced a surge in activity, with volumes up by 60% month-on-month, reflecting increased demand driven by gold price strength.
Gold Price and Long Positions Surge Amid Geopolitical Fears
By the end of January, COMEX gold futures reached 952 tonnes in net long positions, marking a 25% increase month-on-month. Money managers raised their net long positions by 26%, bringing it to 717 tonnes. The WGC attributed this increase to a combination of gold price strength and tariff-related fears.
Despite a volatile start to the year, gold ETFs have shown resilience, with continued strong demand across various global regions as investors seek to safeguard their portfolios amid a backdrop of political uncertainty and market instability.
