Gold ETFs Attract $19bn Amid 10% Price Drop

Global gold ETFs attracted a record $19bn in January, marking their eighth consecutive month of inflows. This surge brought total assets under management to $530bn and holdings to a historic 3,932 tonnes. The flow strength is remarkable, especially as it occurred against a backdrop of a sharp price collapse.

The price drop was driven by forced deleveraging, not a loss of demand. Gold fell from a peak near $5,600 to below $4,400, a decline of over 20%. This selloff was triggered by margin hikes and speculation around Fed leadership, leading to systematic selling and thin liquidity. The move underscored a divergence between paper and physical markets, with futures absorbing most of the liquidation.

The key takeaway is that the price action was a liquidity event, not a fundamental shift. While the pullback has repriced the near-term trajectory, the underlying structural demand from central banks and ETF investors remains intact. The record inflows show that capital is still flowing into the asset, even as leverage is being reduced.

Flow Drivers and Market Structure

Central bank buying remains the primary structural support for gold, with approximately 863 tonnes purchased in 2025 and similar demand expected in 2026. This long-term reserve diversification trend reinforces a higher long-term price floor, anchoring the market through periods of speculative volatility. The recent forced deleveraging selloff highlighted the divergence between paper and physical markets, but central bank flows are a durable, fundamental driver.

Regional flow dynamics show a clear shift. Asia-led inflows have been the engine for months, with November's $5.2bn in global ETF purchases dominated by the region. North American demand has slowed, while European flows flipped positive in November. This pattern suggests that the strongest investor conviction is currently concentrated in Asia, while other regions are more sensitive to near-term policy and economic signals.

The most striking flow data is in gold equities. In January, gold miner ETFs saw record inflows of $3.62 billion, the highest since at least 2009. This surge, part of a broader $4.39bn in precious metals ETF inflows for the month, indicates that capital is rotating into leveraged exposure to the underlying metal. It underscores the market's bifurcation, where physical gold ETFs see record flows even as prices correct, and miners capture additional speculative interest.

Forward Flow and Liquidity Watch

The primary catalyst for gold's medium-term outlook remains a sustained shift in U.S. monetary policy toward rate cuts. This environment supports gold as a non-yielding asset, with investors seeking safety and betting on dollar weakness. The record $91.86 billion in precious metals ETF inflows in 2025 signals persistent capital rotation into the asset class, a trend analysts expect to continue.

The key near-term risk is a rapid reversal in the flow trend due to profit-taking or a stronger dollar. The recent price action shows this vulnerability, with gold falling roughly 10% in two days after hitting record highs. Analysts point to profit-taking and a firmer dollar as immediate drivers, noting the metal's retreat reflects a classic correction after an extraordinary rally rather than a breakdown in the longer-term thesis.

The critical watchpoint is liquidity in the physical market. Thin liquidity during volatility can amplify price moves against a backdrop of strong paper flows. The forced deleveraging selloff earlier in the month, driven by margin hikes and thin liquidity, highlighted this divergence. As long as central bank buying and ETF demand remain robust, the structural floor holds. But execution risk increases with volatility, making liquidity levels a key factor in whether the next move is a pause or a deeper correction.