Gold Reaches New Highs Amidst Robust ETF Inflows and M&A Activity

Gold prices have remained near record highs in July due to increased ETF inflows and strong earnings season. M&A activity is also on the rise, with royalty firms attracting investor attention due to robust free cash flow.

Gold prices remained near record highs in July, driven by a surge in ETF inflows and a robust earnings season for gold miners. The month saw gold ETF inflows decline by nearly 40% to Rs 1,256 crore from Rs 2,080 crore in June [1]. Despite this slowdown, gold's appeal as a portfolio diversifier continued to attract investors, with sustained demand reflecting lingering macro uncertainties and geopolitical risks.

The World Gold Council's Gold Demand Trends report for Q2 2025 highlighted significant investment in gold-backed ETFs, contributing to a 3% year-on-year increase in gold demand [2]. In value terms, a record-high quarterly gold price average of $3,280 per ounce supported a 45% year-on-year jump in total gold demand to $132 billion. Gold bullion ETF holdings increased by more than 615,000 ounces during July, a 0.68% month-on-month rise, contributing to a 10% gain so far in 2025.

July also marked the start of the Q2 2025 earnings season for gold miners, with companies reporting strong operational performance and better-than-expected earnings. Newmont, for instance, reported record free cash flow generation and reaffirmed its 2025 guidance of 5.6 million ounces of gold at all-in sustaining costs of $1,620 per ounce [2]. Agnico Eagle Mines, Kinross Gold, and AngloGold Ashanti also posted strong results and reaffirmed their 2025 targets.

M&A activity in the gold mining sector is on the rise, driven by robust free cash flow. Companies like Torex Gold Resources and Royal Gold announced strategic acquisitions in July, aiming to unlock value and deliver synergies [2]. Royalty and streaming companies, which offer reduced exposure to cost inflation and limited operational risk, are attracting investor attention due to their unique investment profile.

In July, the assets under management (AUM) of Gold ETFs increased by 4% from Rs 64,777 crore to Rs 67,634 crore, underscoring the growing role of gold ETFs in portfolios for wealth preservation and as a counterbalance to risk assets [1]. The Tata Gold ETF delivered an average return of 1.18% in July, with the scheme being the top performer with a 2.04% return.

Despite the slowdown in ETF inflows, gold's allure as a safe haven asset remains strong, supported by central bank buying trends globally and persistent concerns over equity market volatility. Investors are likely viewing gold allocations as a tactical hedge ahead of key economic data releases and policy decisions in the coming months.

References:
[1] https://economictimes.indiatimes.com/mf/analysis/gold-etf-inflows-decline-by-40-to-rs-1256-crore-in-july-heres-why/articleshow/123277699.cms
[2] https://www.vaneck.com/pe/en/news-and-insights/blogs/gold-investing/ima-casanova-gold-stays-strong-m-a-and-earnings-take-spotlight/