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Global gold exchange-traded funds (ETFs) drew net inflows of 46.3 tonnes or worth $2.7 billion in January, led by North American funds partially offsetting the region’s 2021 outflows, according to a report by the World Gold Council (WGC). The inflows were the highest in terms of tonnage since May last year.

Gold price strength amid a sharp selloff in equity markets was supportive for ETF demand, despite a reversal in prices towards the end of the month following the US Federal Reserve's (Fed's) meeting.

The price of the yellow metal was marginally down in January, falling less than 1% to $1,795 per ounce, sequentially. Rising nominal yields, a stronger dollar, and a more hawkish-than-expected Fed statement were the primary headwinds for gold during the month.

Indian gold ETFs saw one tonne of outflows in January, according to the market development organization for the gold industry. It was driven primarily by a rising 10-year Indian government bond yields and expectations of a more hawkish Fed stance. Total gold holdings for the country stood at 37 tonnes by the end of January.

The council said that the retail demand in India remained soft in January due to the reintroduction of covid-19 restrictions and a lack of auspicious wedding dates.

“This pushed the local market into a $1-2 per ounce discount, which widened to $2-3 per ounce by the end of the month. A sideways local gold price and expectations of tax changes for the yellow metal in the Union Budget on 1 February (there was subsequently no change in the tax rate for gold) kept bullion offtake depressed," WGC said in a report.

However, the council believes that retail demand is expected to improve in February on the back of falling covid-19 cases and a moderation in the gold price.

From India, ICICI Prudential Gold ETF saw 0.7 tonnes of net flows worth 48.1 million, representing 13.87% of the fund’s total assets under management (AUM)

Globally, inflows were heavily concentrated in the largest North American funds, with a small increase in European fund holdings. Asian outflows were led by Chinese funds as investors reduced gold holdings ahead of the Chinese New Year, paring back significant gains from 2021.

Global holdings stood at 3,616 tonnes or $209 billion at the end of the month.

In terms of outlook, WGC believes that monetary policy and inflation rates will remain pivotal for gold in the near term. “Gold has regained some ground in the first few days of February, returning to around the $1,800 per ounce level as the initial reaction to the recent Fed statement cooled," WGC said.

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