After a slow start to the summer, investors returned to gold-backed exchange-traded funds (ETF) in August, marking the strongest month since early spring, according to a new report from the World Gold Council (WGC).
Released on Wednesday, the report concluded that inflows surged to 53 tonnes, worth USD$5.5 billion, more than doubling July’s 22.3 tonnes. The sharp rebound signals a renewed appetite for safe-haven assets as economic and geopolitical risks pile up.
North America drove most of the global demand. Funds listed in the region gained 37.1 tonnes, valued at $4.1 billion. Analysts noted that investors sought protection against both economic uncertainty and intensifying global tensions. The WGC emphasized that expectations of Federal Reserve rate cuts played a major role in fuelling the momentum.
Outflows that had surfaced earlier in the summer quickly reversed. Investors shifted positions in the days leading up to the annual Jackson Hole gathering. However, by late August, sentiment had shifted decisively. Traders anticipated a September rate cut as the U.S. labour market showed signs of weakening faster than expected.
The WGC underscored that August inflows were not solely driven by short-term speculation. Low-cost gold-backed ETFs, often seen as a proxy for longer-term positioning, are recording their best year on record. Furthermore, the report showed that investors appear to be steadily building core safe-haven allocations. This trend suggests that demand is rooted in a persistent sense of elevated global risk rather than market noise.
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Stragflation fears cause move in UK
Europe also contributed meaningfully to the August surge. European-listed funds added 20.8 tonnes, equivalent to $1.9 billion. The U.K., Switzerland, and Germany all saw holdings rise. German investors were likely influenced by fears of recession after the country’s second-quarter GDP growth was revised lower. Additionally, safe-haven demand rose as the euro and Swiss franc strengthened against the U.S. dollar, boosting inflows into FX-hedged gold products.
The U.K. recorded one of the stronger performances in the region. Analysts suggested stagflation fears may have fuelled the move. Inflation rebounded, while the announcement of new U.S. tariffs and a tax hike on employers darkened growth prospects. In addition, concerns about price pressures building again pushed more investors toward gold.
Stagflation is an economic condition where slow or stagnant growth occurs alongside high inflation and rising unemployment. Normally, inflation and weak growth do not appear together, but stagflation creates the unusual situation of prices climbing even as economic activity stalls.
Asia delivered the month’s biggest surprise. After posting record growth in the first half of the year, Asian-listed ETFs experienced outflows in August. The selling was concentrated in China, where improving equity market sentiment lured capital away from bullion. Consequently, the region became a drag on global totals, underscoring the importance of Western markets in driving the current wave of demand.
Looking ahead, the WGC expects that investment demand remains well-supported. Analysts flagged stagflation concerns as a rising theme in global markets. Currently, demand leans heavily on the short end of the U.S. yield curve. The Fed looks poised to cut rates this month, which could continue supporting inflows.
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