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Global gold ETFs see largest outflows since March 2021; India logs small inflows

In Asia, Indian gold ETF inflows of 0.4 tonne outweighed outflows in Chinese-listed funds at 0.3 tonne during September. (Photo: iStock)Premium
In Asia, Indian gold ETF inflows of 0.4 tonne outweighed outflows in Chinese-listed funds at 0.3 tonne during September. (Photo: iStock)

Gold prices fell for the sixth consecutive month in September, dropping 2.6% to finish at $1671.8 per ounce. It was a challenging month for most assets, with global equities down 9.5%, global bonds down 5.1% and commodities down 8.4%

NEW DELHI: Global gold exchange-traded funds (ETFs) reported fifth consecutive month of net outflows in September as holdings dropped another 95 tonne, or $5 billion. This was the largest monthly outflows since March 2021, according to a report by the World Gold Council (WGC).

By the end of September, global gold ETF holdings were at 3,548 tonne, or $191 billion, a 1% decrease in tonnage terms since the start of the year.

In Asia, Indian gold ETF inflows of 0.4 tonne outweighed outflows in Chinese-listed funds at 0.3 tonne during September.

As per WGC, retail demand in India got off to a healthy start in September, boosted by a correction in local gold prices and festival-related purchases. Demand softened in the country during the inauspicious period of Pitru-Paksha (10-25 September) but lower prices enticed some consumers to make both spot purchases and advance bookings for upcoming festivals and weddings. The month ended on a positive note with solid purchases ahead of Navratri.

In global markets, North American ($3 billion) and European funds ($2 billion) accounted for the bulk of outflows. The largest and most liquid US funds drove outflows worldwide, as stubbornly high inflation led the US Federal Reserve to hike interest rates by a further 75 basis points. The UK, German, Swiss and French listed funds were the main contributors to the overall fall in European holdings, encouraged by higher interest rates from the European Central Bank and a British pound sterling crisis triggered by fiscal policy decisions.

“Conditions remained challenging for gold throughout the month, owing to the stiff headwinds of continued US dollar strength and higher yields on the back of hawkish actions by the US Fed," said WGC, a market development organization for the gold industry.

Gold prices fell for the sixth consecutive month in September, dropping 2.6% to finish at $1671.8 per ounce. It was a challenging month for most assets, with global equities down 9.5%, global bonds down 5.1% and commodities down 8.4%.

“While a relative outperformer and thus a good diversifier, gold wasn’t the crisis hedge it has often been historically, certainly when measured in US dollars. However, for non-US investors, gold performance remains strong on a year-to-date- basis," WGC said.

The council believes that the dollar will be a key driver of gold prices over the next few months and sees risks to dollar strength primarily from valuation, positioning and further central bank intervention, which would be gold supportive.

“In addition, it appears that gold investors now view policy rates as less of a threat to gold than before," said WGC.

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