The global gold market experienced a turnaround in May, ending a 12-month slump for gold exchange-traded funds (ETFs) with a resurgence in inflows. This positive momentum was driven by strong demand in Europe and Asia, despite minor outflows in North America.
By the end of May, global gold ETF holdings had risen to 3,088 tonnes, with total assets under management (AUM) reaching $234 billion, a 2% increase for the month. Physically backed gold ETFs enjoyed a net inflow of $529 million, marking their first positive movement since May of last year.
Among the top buyers was India, purchasing $86.5 million worth of gold, further supporting the market’s upswing.
Europe and Asia were the primary contributors to the positive fund flows. European gold ETFs recorded their first inflows in a year, narrowing year-to-date outflows to $6.3 billion. Swiss and German funds led the way, anticipating a potential rate cut by the European Central Bank.
Asia maintained its 15th consecutive month of inflows, totaling $398 million in May. China accounted for $253 million of these inflows, spurred by rising local gold prices and a weakened currency. Japan also saw robust inflows due to attractive local gold price gains.
North America experienced minor outflows of $139 million in May, ending a two-month positive streak. However, the region’s total AUM increased to $119 billion due to the strong gold price.
Trading activities in global gold markets showed a decline, with the average daily trading volume standing at $216 billion in May, down 13% from April but still above the 2023 average. The Shanghai Futures Exchange and Shanghai Gold Exchange experienced significant drops in trading volumes.
Gold prices continued to climb, achieving a third consecutive monthly gain in May. The price hit an all-time high of $2,427 per ounce mid-month before retreating to $2,348 per ounce, supported by net long positions and renewed interest in gold ETFs.
The World Gold Council’s Gold Return Attribution Model noted that while no single variable was the dominant driver in May, positive momentum and a weaker US dollar contributed to the price rise.
The trajectory of US economic growth and inflation will continue to shape currency markets and, by extension, gold prices. If the recent trend of US dollar weakness persists, it could provide a substantial upside for gold in the coming months, as periods of significant dollar weakness have historically been beneficial for gold prices.
(Inputs from ANI)