Gold ETFs Drew Largest Inflows Last Week Since March 2022 - Know Why

Physically backed gold exchange-traded funds (ETFs) made significant inflows in the week starting February 17. A report by the World Gold Council (WGC) said that Gold ETFs registered an inflow of 52.4 metric tons of gold worth $5 billion last week.

Gold ETFs store gold bullion for investors to replicate the price movements of physical gold. This in turn allows ETF investors to invest in gold without going through the hassles of either storing or securing the physical gold.

Notably, the inflows made in the week starting February 17 are the largest inflows made by ETFs after the first week of March 2022. Earlier on March 22, gold ETF inflows surged as global markets dealt with the immediate consequences of the Russia-Ukraine conflict.

With the 52.4 metric ton inflows, ETFs raised their total holdings of gold by 1.6 per cent to 3,326.3 tons. Notably U.S.-listed funds made the highest inflows of 48.7 tons.

The high inflows also increased the demand for the yellow metal which led to spot gold prices touching a record high of $2,956.15 per troy ounce on February 24. However, the price settled at $2,947.48 per troy ounce. With gold touching the $2,956.15 per troy ounce mark, the yellow metal registered its eleventh record high this year.

Ajit Mishra – SVP, Research, Religare Broking Ltd told Outlook Money that the SPDR Gold Trust, the world’s largest gold-backed ETF also increased its holdings significantly to 904.38 tonnes on February 21 which gave support to the rising gold prices.

“Gold prices also found support from sustained demand through the SPDR Gold Trust, the world’s largest gold-backed ETF, which reported an increase in holdings to 904.38 tonnes on Friday—the highest level since August 2023. The SPDR Gold Trust ETF saw its fastest pace of growth since the Covid crisis,” Mishra said.

Why Are Inflows By ETFs Increasing

The demand for gold and gold-backed assets such as gold ETFs is rising as investors are seeking safe-haven investments. Investors are seeking safe haven assets in response to concerns over the imposition of trade tariffs by US President Donald Trump and other ongoing economic uncertainties.

Earlier in February, Trump announced his plans to impose tariffs on US trade partners. The tariffs have sparked concerns regarding potential disruptions to global markets. Typically such uncertainties boost the demand for safe-haven assets like physical gold and other gold-backed assets like gold ETFs.

“This trend highlights growing investor interest in gold as a safe-haven asset amid global economic uncertainty. US-listed gold funds added 48.7 tonnes last week, fully reversing their January outflow of 6.3 tonnes," Mishra said.

Mishra added that concerns regarding Donald Trump’s executive order which seeks to impose trade tariffs and deteriorating U.S.-China relations have heightened demand for safe haven assets, which in turn pushed gold prices higher.

"On Monday, gold bullion surged to a record high of $2,956.19 per ounce, driven by rising safe-haven demand amid concerns over higher U.S. trade tariffs and deteriorating U.S.-China relations. Over the weekend, former President Donald Trump signed a sweeping executive order imposing additional trade and investment restrictions on China, signaling a potential further escalation in tensions. This move is likely to prompt retaliatory measures from both sides, fueling fears of a global trade war,” Mishra said.

The demand for gold and gold-backed assets is also impacted by bond yields. Notably, investors are keenly awaiting the release of the US personal consumption expenditures report and speeches from nine U.S. central bank officials who can indicate the US Federal Reserve’s stance on rate cuts. The US personal consumption expenditures report is expected to be released on February 28.