Global gold exchange-traded funds (ETFs), backed by physical gold, witnessed net inflows of $3 billion in January on political uncertainties in Europe and the weak equities market in the Indian subcontinent.
The World Gold Council (WGC) said European funds were the main drivers of these inflows. They added $3.4 billion in January- the highest since March 22. Indian ETFs witnessed record inflows of $400 million during the month.
“The most notable shift (in inflows) comes from Europe: while it led global outflows during most of 2024, it now dominates inflows. Despite gold’s strong performance, North American investors remained net sellers of gold ETFs in the month, while Asia and the other regions saw limited inflows,” the WGC said.
Total AUM
By the end of January, the total asset under management (AUM) of ETFs reached $294 billion, another month-end record, and collective holdings continued to rebound (+34 tonnes).
Asian funds added $57 million in January mainly due to Indian funds’ record inflows. This was because investors redirected cash to gold amid ongoing global uncertainty and further weakness in domestic equity markets.
“Yet China saw notable outflows: the stronger-than-expected Q4 and 2024 GDP growth may have raised investor risk appetite, limiting expectations of future rate cuts and supporting the local currency,” the WGC said.
Alongside potential profit-taking activities, Chinese investors dialled back their gold ETF holdings.
Germany polls
In Europe, the UK and Germany dominated the inflows. In the UK, government bond yields fell during the second half of January as easing inflation pressure and soft economic data prints raised investor expectations for rate cuts from the Bank of England during 2025.
“Reduced opportunity cost of holding gold, alongside a robust gold price performance, drove local investors into gold ETFs,” it said.
In Germany, political uncertainties ahead of the earlier-than-scheduled parliamentary elections in late February, a pessimistic growth outlook and risks related to US trade policies contributed to higher safe-haven demand, drawing local investors to gold.
France, which too faces political instability and weaker growth prospects, also experienced notable inflows as investors sought safe-haven assets.
The ETF outflows in North America continued for the second consecutive month. The funds lost $499 million in January.
Demand pick-up
“Investors stayed busy this month (January), particularly around President (Donald) Trump’s inauguration, and the subsequent news that followed around tariffs, rates, and the dollar. Heading into the inauguration we saw increased option activity and positive flows into North American funds, along with a rising gold price,” the WGC said.
However, these flows quickly reversed in the week of Trump’s inauguration as investors likely captured profits amid a record-level gold price and from shifts in positioning as Trump began to release executive orders, while also providing colour on future policy decisions.
A pick-up in demand into the last week of January was unable to offset earlier outflows. “The final week of the month saw the US Fed keep rates unchanged as expected, which had limited impact on investor expectations of yields,” it said.
‘Rattled equities’
The WGC said it believes the “rattled” equity market – particularly widespread tech stock selloffs related to the AI buzz around DeepSeek – and the gold price’s record-breaking performance attracted investor attention.
Funds in other regions saw inflows of $66 million, driven primarily by Australia and South Africa.
Gold trading volumes averaged $264 billion/day across global markets in January, 20 per cent higher month-on-month (mom). The increase can be mainly attributed to surging volumes at COMEX (+60 per cent mom), which pushed activities at exchanges around the globe 39 per cent higher mom – as the gold price strength attracted traders.
The OTC market (+10 per cent mom) and global gold ETFs (+23 per cent, mom) also saw increased trading during the month.
Total net longs of COMEX’s gold futures ended January at 952 tonnes, a 25 per cent mom increase. Money managers increased their net long positions by 26 per cent to 717 tonnes by the end of the month.
“We believe the gold price strength and tariff-related fears were primary drivers of increased long positioning,” the WGC said.