Gold ETFs: Five Months of Inflows in September

Gold exchange-traded funds (ETFs) continued their streak of inflows in September, marking the fifth consecutive month of positive flows, according to the World Gold Council (WGC). This article explores the factors driving these inflows and their regional distribution.

Geopolitical tensions and economic uncertainty played a significant role in driving gold ETF inflows during September. The escalation of conflicts in the Middle East and the Russia-Ukraine crisis likely contributed to investors' appetite for safe-haven assets like gold. Additionally, central bank policies and interest rates influenced gold ETF inflows. Central banks' dovish stance and lower interest rates reduced the opportunity cost of holding gold, making it an attractive investment option.

The performance of other asset classes also impacted gold ETF inflows. Lower yields on equities and bonds, coupled with increased market volatility, drove investors to seek refuge in gold ETFs. The strengthening US dollar and global currency dynamics, however, posed a challenge to gold's appeal, as a stronger dollar makes gold more expensive for foreign investors.

Regional inflows in September were driven by various factors. In North America, easing inflation readings, a cooling labor market, and dovish messages from the Federal Reserve contributed to inflows. In Europe, fear stemming from headlines around the unwind of the popular "yen carry trade" resulted in a spike of volatility in global equity markets, boosting safe-haven demand for gold ETFs. In Asia, the US$32mn addition was the smallest since May 2023, with India leading inflows and China leading outflows.

Inflows in September compared to previous months showed a mixed picture in terms of regional distribution. North America saw inflows for the second consecutive month, while Europe's inflows slowed down compared to previous months. Asia's inflows, however, were the smallest since May 2023.

In conclusion, gold ETFs registered their fifth month of inflows in September, driven by geopolitical tensions, economic uncertainty, central bank policies, and the performance of other asset classes. Regional inflows were influenced by various factors, with North America, Europe, and Asia contributing to the overall global inflows. As the global economic landscape continues to evolve, investors will likely remain vigilant and seek safe-haven assets like gold ETFs to diversify their portfolios.