Investors sell gold ETFs for fourth year even with Fed easing

Investors sold off gold-backed exchange-traded funds for a fourth straight year in 2024 despite a backdrop of repeated record high prices and the start of monetary easing by the Federal Reserve.

While optimism of Fed interest rate cuts in 2024 helped gold ETFs rebound a bit, the US election results in November ended that newfound momentum. A stronger dollar following Donald Trump’s election win saw a renewed selloff of those exchange-traded funds, with bullion prices declining from an all-time high as investors redirected money elsewhere, including equities and Bitcoin.

Investors typically seek safety in bullion in times of political and economic uncertainty. They bought gold ETFs during the pandemic in 2020 and started selling them two years later when the US central bank began raising interest rates to combat inflation. Higher rates make bullion less appealing since it pays no interest.

At the same time, geopolitical risks from conflicts in Ukraine and the Middle East saw central banks in emerging markets, Asian investors and consumers flock to physical bullion as a portfolio diversifier and hedge. That reduced demand for gold ETFs.

(By Yvonne Yue Li)