Gold ETFs inflow up at 6-year high in December on Asia buys

Inflows into global gold exchange-traded funds (ETF) hit a six-year high, increasing by $778 million, in December 2024 (a gain of four tonnes) following strong buying in Asia.  

The purchases offset the outflows in North America. However, global gold ETF and OTC trading both fell 29 per cent and 13.5 per cent, respectively.

On the other hand, global gold trading volumes jumped in 2024, reaching $226.3 billion/day, 39 per cent higher than in 2023 and the highest on the WGC record. 

Nov weakness

“Those (ETF) outflows were benign given the weakness in November and the prospect of profit-taking following such a strong year. A positive sell-side outlook for gold probably helped constrain a bigger end-of-year shift out of gold,” the World Gold Council (WGC) said in a research note.

Asian funds saw inflows again in December, attracting $748 million. For the eighth month in a row, inflows in ETFs in India continued, albeit moderately, as investors were attracted due to the volatility in the rising equity market and a bullish sentiment towards gold. 

China led the way in Asia as plunging government bond yields amid intensifying expectations of further rate cuts from the central bank and a weakening local currency on concerns of a potential trade war with the US drove up haven demand among domestic investors. 

5-month inflow ends

December also witnessed the end of a five-month inflow streak in North American funds, which lost $342 million. Despite the anticipated 25 basis points rate cut last month, the US Fed signalled a hawkish stance as it updated projections to show fewer rate cuts in 2025 amid expectations for stubborn inflation. 

“Consequent rises in the US Treasury yields and the dollar weighed on gold price, leading to gold ETF outflows. But, they were partially mitigated by sizable inflows generated from major gold ETF option expiries,” WGC said. A decline in broader market activity over the holiday season also influenced the outflows. 

Gold volatility has declined since the outcome of the US presidential election, but this will likely change in the run up to Donald Trump being sworn in as the President on January 20. This might reignite investor interest, it said.

European funds saw mild inflows of $337 million in December with investments largely being driven by increased demand in France, which can be attributed to the ongoing political turmoil as a new French government is formed.

Dec trading volume slips

“We believe elevated geopolitical risks continued to contribute to European inflows, although these were largely offset by outflows from Switzerland – mainly from FX-hedging products amid the weakening local currency against the dollar – and Germany – potentially driven by a sharp rise in its government bond yields. FX movements also resulted in a marginal drop in regional holdings despite positive flows,” the WGC said.

Funds in other regions reported limited flows of $35 million. This was driven by minor inflows from Australia and South Africa.

In December, gold trading volume dropped 24 per cent month-on-month, averaging  $221 billion/day across global markets. The decline can be mainly attributed to lowering volumes at COMEX and Shanghai Futures Exchange as the limited gold price volatility discouraged tactical investors. 

The gold futures market witnessed profit-taking and extending to managed money net longs, which shed $4 billion (-49 tonnes) over the month taking total net positions down to $65 billion (764 tonnes).

Net longs fall

Total net longs of COMEX’s gold futures ended December at 764 tonnes, a 5 per cent month-on-month fall. Money managers reduced their net long positions by 9 per cent to 567 tonnes by the end of the month. We believe the gold price weakness and dollar strength likely contributed to diminished interest in gold futures trading. 

Funds in other regions reported limited flows of $35 million. This was driven by minor inflows from Australia and South Africa.

Almost all markets saw peak volumes in value terms: OTC activities soared 37 per cent; exchange-traded volumes, 40 per cent; global gold ETF trading, 32 per cent. Notably, volumes on the Shanghai Futures Exchange rose the most, reaching a record high. 

“...these increases were not solely driven by the record-shattering gold price; volumes measured in tonnage also improved across all sectors.”

Nonetheless, 2024 money manager net longs averaged 555 tonnes, a notable pick-up from 2023’s 289 tonnes and the highest since 2011. The gold price strength and rising haven demand amid uncertainties stemmed from various fronts, we believe, attracted investors.