Gold ETFs Record First Outflow Since November, Says World Gold Council

Global gold-backed ETFs experienced outflows of 19 tonnes, valued at $1.8 billion, in May, marking the first outflow in five months as improved risk appetite and easing US-China trade tensions reduced safe-haven demand; North America saw the largest outflows due to rebounding equities and expectations of higher interest rates by the end of 2025, while Asia also experienced outflows, primarily from China, though European funds continued to see inflows driven by economic concerns and political instability, particularly in France.

Analysis

Global gold-backed ETFs experienced their first net outflow in five months during May, totaling 19 tonnes valued at $1.8 billion, which reduced total physical holdings to 3,541 tonnes and assets under management (AUM) to $374 billion from a record $379 billion the previous month. This reversal, accompanied by a gold price retreat from over $3,500 per ounce in late April to $3,384, was primarily attributed to improved investor risk appetite following the temporary easing of US-China trade tariffs and expectations of higher US interest rates by the end of 2025, which increases the opportunity cost of holding gold. North American funds bore the brunt of these outflows, contracting by 16 tonnes ($1.5 billion) due to these factors and a more measured Federal Reserve approach to future interest rate cuts, while Asian ETFs also saw their first outflows since November, led by China, amounting to $489 million (5 tonnes) as safe-haven demand diminished. Conversely, European ETFs registered inflows of 2 tonnes ($225 million), driven particularly by French demand amid sluggish economic growth, US tariff threats, and intensifying fiscal and political concerns, offsetting outflows in Germany and the UK. Despite May's downturn, year-to-date gold ETF flows remain significantly positive, with $30 billion in inflows and a 322-tonne increase in physical holdings since the start of 2025.

Key Decisions for Investors

• Investors should acknowledge the recent shift away from gold ETFs, primarily driven by improved risk sentiment and rising expectations of US interest rates, which particularly impacted North American funds.
• Monitor evolving US-China trade relations and US Treasury yield movements closely, as these are critical indicators for the near-term direction of gold demand and associated ETF flows.
• Consider the persistent inflows into European gold ETFs, fueled by regional economic and political concerns, alongside positive year-to-date global figures, suggesting that while tactical caution is warranted, underlying strategic support for gold may endure in certain segments.