Indian and Chinese gold exchange-traded funds (ETFs) attracted the largest inflows globally in August 2023, even as demand for the precious metal saw a slump.
August 2023 recorded massive outflows of gold-backed ETFs from North America and Europe, and only Asia saw positive inflows of $429.8 million (6.6 tonnes) on the back of strong inflow from China ($292.8 million) and India ($118.6) at 4.6 tonnes and 1.7 tonnes, respectively, according to the World Gold Council.
ICICI Prudential Gold iWIN ETF from India along with Huaan Yifu Gold ETF from China attracted the largest inflows globally at $104 million and $171 million, respectively. They were followed in third place by Wisdom Tree Physical Gold EUR Daily Hedged from Italy at $62.9 million.
Incidentally, this was the third monthly outflow from North American funds ($2.7 billion or 44 tonnes), the largest since September 2022 ($3.2 billion or 60 tonnes). As expected, the largest funds, namely SPDR Gold Shares, iShares Gold Trust, and SPDR Gold MiniShares Trust saw the most outflows.
In Europe, Amudi Physical Gold ETC from France and iShare Gold ETC from the UK lost the most at $120 million and $67 million, respectively.
According to the World Gold Council, August 2023 was a challenging time for the precious metal. Gold declined marginally by 1 per cent in August on the back of higher yields and a stronger dollar. In addition, the sentiment also remained weak for most of the month, as ETFs continued to lose assets under management (AUM).
WGC said in its report that soft US economic data also suggests a likely slowdown. However, this “alongside a potential change in the shape of the yield curve, could signal an environment where gold has historically performed well,” it added.
The report said that the shift in the 10-year US Treasury yield can likely be attributed to three main factors – a shift up in the ‘higher interest rates for longer’ narrative, supply and demand forces, and a rise in the risk premium, adding that the latter factor might start to provide support to gold prices, if it continues to increase.
“If we simply look at bear steepening, gold tends to underperform – with low single digit average returns. Historically, the most likely successor to a bear steepening is a bull flattening (approx. a third of the time),” WGC said in its report.
“This partly took place at the latter end of August with gold likely benefitting from such yield declines. Also, soft data continue to suggest that a slowdown is still firmly on the cards. This could result in either a bull steepening or a rare ‘bear’; both phases have on average been gold friendly, yielding an annualised return of 15 per cent – the highest of all the phases,” it added.