Gold investors sold their holdings in exchange-traded funds (ETFs) during May, ending the inflows witnessed since December 2024, mainly on outflows witnessed in North America and Asia, data from the World Gold Council (WGC) showed on Friday.
The physically-backed gold ETFs witnessed a $1.8 billion outflow in May. A mild fall in gold prices last month led to total assets under management (AUM) of global gold ETFs declining by one per cent to $374 billion. Collective holdings of the precious metal declined by 19 tonnes to 3,541 tonnes.
“Despite May’s loss, global gold ETF flows have remained positive so far in 2025, at $30 billion. Holdings have also seen a cumulative rise of 322 tonnes during the period,” said the WGC.
China leads Asian trend
Barring Europe, all regions saw outflows in May. North America witnessed the largest outflow. In Asia, the strong momentum witnessed in April reversed. Europe registered mild inflows, while funds in other regions experienced a small loss for the first time in six months.
In May, the net outflows in North America were $1.5 billion, the first time it turned negative since January. The temporary, better-than-expected easing of US-China tariffs boosted investor risk appetite, fueling an equity rebound but dampening haven demand for gold, the WGC said.
Chinese-led outflows led to Asia pruning its holdings by $489 million in May, the first since November 2024. In China, the haven demand diminished amid de-escalating trade tensions with the US and subsequent equity rebounds. The weakness in the gold price in the Chinese yuan further contributed to the outflow. However, Japan saw inflows for the eighth month in a row, though they were modest.
Europe bucked the trend in May, with $225 million inflows in gold ETFs. Though there were continuous outflows in Germany and the UK, inflows in France more than offset them.
Inflows stable in France
The WGC said France has witnessed stable inflows over the past three months. It said the drivers of the rising demand for gold ETFs in France may be related to sluggish economic growth and weakening consumer sentiment, the Trump administration’s escalation of tariff threats that attracted gold ETF inflows across Europe in late May and intensifying fiscal concerns, besides political instability.
Outflows in Germany were believed to have been driven by cooling global trade uncertainty, which pushed up investor risk appetite. However, Trump’s renewed tariff threats on Europe later in the month ended it. Despite the Bank of England’s rate cut, lowering trade risks – as the UK reached a deal with the US – cooled gold ETF demand. Weaker gold price performances denominated in local currencies may have also discouraged investors, the council said.
Funds listed in other regions experienced minor outflows of $27 million in May, ending a five-month inflow streak, mainly from Australia and South Africa.
The WGC said the market is now expecting higher rates by the end of 2025, leading to rising US Treasury yields and increasing the opportunity cost of holding gold. Minutes of the US Fed of its May meeting showed a cautious stance towards rate decisions amid an outlook of persistent inflation and risks to the labour market.
Though higher US Treasury yields have historically been negative for gold ETF demand, current developments don’t necessarily spell bad news, said the WGC.