Gold becoming attractive investment with strong inflows in Asia- both in China and India
G
lobal gold ETFs have recorded their first positive demand for 2024, with year-to-date inflows reaching 18 tonnes, according to the World Gold Council.
Asian markets are leading the surge, bringing total assets under management (AUM) up by an impressive 33 per cent, as inflows this year have hit a substantial USD 4.7 billion.
Asian gold ETFs attracted USD 2.1 billion in October alone, marking the region's 20th consecutive month of inflows. China has seen record-breaking investment in gold ETFs, spurred by soaring local gold prices and rising stock market volatility.
A wave of stimulus announcements in late September provided additional fuel for the gold demand, leading to the highest monthly inflow on record.
India has also experienced steady growth in gold ETF investments. The positive momentum in gold prices, coupled with stock market fluctuations, has boosted interest in gold as a stable asset. Recent adjustments in India's long-term capital gains tax treatment for gold have further increased its appeal to investors.
Improved trading volumes in over-the-counter (OTC) markets and heightened ETF activity have also played a role in strengthening global gold demand.
With global gold prices remaining strong and volatility continuing in equity markets, gold is becoming an increasingly attractive investment.
This trend has translated into robust inflows, elevating gold ETFs to their highest asset levels in 2024. As geopolitical and economic uncertainties persist, gold ETFs are likely to remain a key choice for investors looking for stability.
North American gold ETFs reported inflows for the fourth consecutive month in October, adding Usd 2.7 billion to the sector. This continued demand has surprised many, given the simultaneous rise in bond yields and a strengthening U.S. dollar, which typically dampen interest in gold.
However, investor concerns over uncertain interest rate paths, fueled by robust US economic performance, and mounting geopolitical tensions have supported gold as a safe-haven asset.
The ongoing US presidential election has added a layer of uncertainty, contributing to the demand for gold. Many investors have acted on a "fear of missing out" (FOMO) as gold prices surged, and the escalating Middle East conflict, along with speculation about North Korean involvement with Russia in the Ukraine war, has further heightened safe-haven demand.
In contrast, European gold ETFs saw outflows of USD 563 million in October, with outflows spreading across major markets instead of being concentrated in the UK as in previous months.
Higher yields across European government bonds, despite the European Central Bank's recent rate cut of 25 basis points, have raised the opportunity cost of holding gold.
Additionally, the UK saw rising Gilt yields, further driving investors away from gold. The strengthening US dollar and weakening local European currencies amid Europe's challenging economic outlook also pushed investors to shed FX-hedged gold products, amplifying the region's losses.
Other regions reported positive inflows for a fifth consecutive month, with Australian and South African funds collectively adding USD 68 million in October. In Australia, the weakening Aussie dollar boosted gold returns for local investors and increased currency hedging activity.
✔️ Gold becoming attractive investment with strong inflows in Asia- both in China and India
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