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February 26, 2024
PI Global Investments

Gold ETFs Recorded 244-Tonne Outflow In 2023

Global gold-backed exchange-traded funds (ETFs) witnessed their third successive yearly outflow in 2023, according to the World Gold Council (WGC).

Funds endured outflows of $14.7 billion last year, a reversal that took total assets under administration (AUMs) to $214.4 billion. AUMs dropped in spite of the yellow metal price rising 15% over the course of the year and reaching record peaks of $2,135 in early December.

Total ETF holdings fell by just over 244 tonnes in 2023, to 3,226 tonnes.

Last year’s decline was driven by heavy redemptions across European funds. Outflows on the continent totalled $11.5 billion, the highest figure since 2013.

The WGC said that outflows during most of 2023 “were driven by the region’s rocketing interest rates, the hawkish stance of local central banks, strong currencies and rising living costs which, among other factors, may have led to profit taking.”

Total AUMs in European ETFs dropped to $91.9 billion. In physical terms these funds experienced a 180-tonne outflow, taking aggregated holdings to 1,386 tonnes.

Mixed Results Elsewhere

ETFs located in North America, meanwhile, recorded a $4.5 billion outflow in 2023, reducing AUMs to $108.9 billion. There were 1,643 tonnes of the yellow metal held in continental funds at year’s end thanks to an annual outflow of 82 tonnes.

The WGC said that redemptions “were mainly associated with gold price weakness and surging opportunity costs including higher Treasury yields and a stronger dollar.”

However, it added that “strong gold price rises and safe-haven demand amid the banking sector turmoil” helped mitigate outflows in the first half, while weakening yields and a falling dollar on expectations of interest rate cuts supported holdings towards the end of 2023.

Unlike in the West, ETFs in Asia attracted positive demand last year, with AUMs rising to $9.6 billion thanks to inflows of $1.3 billion.

Regional funds added 19 tonnes of metal to take total holdings to 138 tonnes.

The Council noted that “global geopolitical tensions, local economic uncertainties as well as the eye-catching performances of gold in different currencies fuelled positive gold ETF demand.” It added that China, Japan and India contributed most to 2023’s positive result.

December Caps Annual Fall

Further outflows in December exacerbated rising ETF redemptions last year. These totalled $1.1 billion or 10 tonnes.

The WGC commented that “while the gold price performance and a dovish Fed supported North American inflows, stronger currencies and hawkish local central bank stances deterred European gold investors.”

European funds endured outflows of $2 billion last month, or 25 tonnes. This more than offset inflows of $717 million (or 11 tonnes) in North America, and $208 million (or 3 tonnes) in Asia.

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