Investors’ exits from physically backed gold exchange-traded funds (ETFs) last week were the largest yet this year as gold declined by over three per cent to near $4,000 an ounce, data from the World Gold Council (WGC) showed.
For every inflow of $1 in gold ETFs, outflows were nearly $7, led mainly by the US and Chinese investors. The outflows came after ETF inflows turned positive in the week ending June 19, following five weeks of continuous exits.
WGC data showed that while investments were $801.1 million in the week ending June 26, outflows were $5.50 billion, leading to net investments of a negative $4.7 billion.
Holdings down
Gold holdings in ETFs declined to 4,048.1 tonnes last week from 4,086.4 tonnes a week ago.
Region-wise, North America saw the heaviest outflow at $2.99 billion, followed by Asia at $1.08 billion. Europe also saw investors exit to the tune of $647 million.
Renisha Chainani, head of research at Augmont, attributed the slip in gold to hawkish Fed Chair Warsh, personal consumption expenditure inflation at 4.1 per cent, and three anticipated rate hikes. The US-Iran tensions also lifted haven demand.
“A stronger dollar continued to weigh on bullion, while expectations of higher interest rates reduced the appeal of non-yielding assets such as gold. Buying interest from central banks has also slowed as markets reassess the global interest rate outlook,” said Jateen Trivedi, VP Research Analyst, Commodity and Currency, LKP Securities.
US tops outflows
Country-wise, outflows from the US were the highest at $2.98 billion, followed by China at $1.05 billion. Data on India were unavailable, but there were significant exits in the UK ($365 million), Switzerland ($217.9 million) and France ($202 million).
Year-to-date, investors in the US have cashed in the most at $7.69 billion, followed by those in France ($578 million) and Italy (205 million).
China and India are the countries where inflows were still the highest at $5.88 billion and 3.46 billion, respectively. However, outflows from ETFs in China have declined from over $9 billion two months ago.
Most exits from SPDR
WGC data showed that exits from the SPDR Gold Shares were the highest at $9.02 billion, followed by iShares Gold Trust at $4.06 billion.
Gold ETFs have been witnessing outflows after the Iran war broke out on February 28. Investments in ETFs were primarily responsible for the yellow metal peaking at $5,608 an ounce on January 29. Since then, they have declined by over 25 per cent.
On Monday, gold was quoted at $4,040 an ounce at 1900 hours IST. The precious metal has shed nearly 10 per cent month-on-month. Fears of inflation, increasing bond yields, strengthening of the dollar and the expectation of a drop in global economic growth have dragged gold.
The precious metal rallied smartly between 2024 and February 2026 as investors saw it as an asset when central banks considered interest rate cuts, geopolitical tensions mounted and US tariff wars with various countries increased.