Global gold ETFs record net outflows of $ 9 billion in 2021, India sees inflows

Global gold exchange-traded funds (ETFs) posted net outflows of 173 tonnes or $ 9.1 billion as hopes of economic recovery led by vaccine rollout impacted bullion prices in the first half of the year of the year.

Assets under management (AUM) in value terms fell 9% to $ 209 billion in the year, according to a World Gold Council report, with net outflows worsened by a 4% contraction in prices. gold.

“The price of gold recovered at the end of the year in the wake of the rapidly spreading Omicron variant, probably causing leakage flows to quality, but that was not enough to make up for the losses of the early 2021. After the first half of the year – when it fell more than 10% – gold has hovered between $ 1,700 / oz and $ 1,850 / oz for much of the year, “said the gold industry market development organization.

Despite significant cash outflows for the year, ETF holdings of gold have remained well above pre-pandemic levels as they recorded record inflows of around 875 tonnes or $ 49 billion. in 2020.

The data also showed that India-based gold ETFs saw inflows of 9.3 tonnes or $ 595.3 million during the year.

Additionally, Asian ETFs accounted for the vast majority of inflows among global funds, despite some weakness in the second quarter, adding nearly $ 1.5 billion in 2021.

“This was particularly true for China-based funds, which accounted for over 60% of total inflows for the region, driven by concerns about slowing economic growth and lower return expectations as well as local investors profiting from the situation. ‘a lower price of gold. WGC noted in the report.

On the flip side, the North American outflows were once again coming from larger US funds, likely triggered by the US Federal Reserve (Fed) indicating its intention to raise several interest rates in 2022 to fight high inflation. for decades, while planning to reduce asset purchases. at the beginning of the year.

The North American region recorded a total cash outflow of 199.5 tonnes or $ 10.9 billion in 2021.

Outlook 2022

Looking ahead, the WGC believes gold prices will experience a similar dynamic in 2022.

Persistent high inflation combined with high stock valuations, potential new covid variants, and a growing appetite for less liquid assets, may well lead to more frequent market pullbacks and increased demand for gold, Council says. as wallet cover.

Bullion could also find continued support from consumer demand and central bank buying, both of which remain important long-term performance drivers.

However, WGC warns that gold may also face challenges if interest rates rise faster than expected. “In our view, however, despite potential rate hikes, nominal and real interest rates will remain historically low. This, in turn, will continue to drive structural changes in the composition of investment portfolios and will likely increase the need for a high quality liquid asset such as gold, ”WGC wrote.

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