Gold price slump led to $4.6bn monthly loss in ETFs

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Gold exchange-traded funds (ETF) lost 2% – or $4.6 billion – of holdings in February as bullion depreciated and interest rates increased during the month, the World Gold Council (WGC) reported on Thursday.

Global gold ETFs lost 84.7 tonnes in the process, marking outflows for the third time in four months, and the seventh worst historical monthly holdings loss, according to the Council.

As a result, global assets under management now stand at 3,681 tonnes – valued at $207 billion – levels last seen in June 2020 when the price of gold was near the February closing level of $1,743 per ounce.

Regionally, the WGC reports that momentum trading impacted larger funds in North America, with outflows falling by 3.4% or 71.2 tonnes for a total loss of $4.1 billion.

Holdings in European funds, meanwhile, fell by 1.1% or 23.8 tonnes, with a value of $1.1 billion.

However, funds listed in Asia had strong net inflows, increasing by 8.4% or 10.6 tonnes for a gain of $596 million.

The remaining regions had outflows amounting to a 0.7% decrease or 0.3 per tonne, and worth $27-million.

According to the WGC, global assets under management have retraced the last six months of overall inflows over the past four months.

The larger gold ETFs accounted for most of the asset losses in recent months, likely from momentum trading, while low-cost gold-backed ETFs continued to see assets grow.

As such, month-to-month swings in overall global flows will continue to be dominated by US and UK funds, says the organization, adding that the Asian ETFs will continue to grow assets despite other regions faltering.

Gold crumbling

Meanwhile, gold prices continued their decline to a near 9-month low on Thursday, pressured by more gains in the dollar and US Treasury yields.

Spot gold dropped below the $1,700/oz level, down 0.7% to 1,698.39/oz by market close. US gold futures also fell 1.2% to $1,694.90/oz in New York.

Click here for an interactive chart on gold prices.

Gold is likely to go lower from here, said Phillip Streible, chief market strategist at Blue Line Futures in Chicago, in a note to Reuters.

“The ETF liquidation is still very strong too. You have too many people that bought it at these higher levels… They are eventually going to throw the towel in on it,” Streible added.

(With files from Reuters)