(Kitco News) – Rising inflation fears and geopolitical uncertainty pushed investors into gold-backed exchange-traded funds (ETFs), helping the price rise 6% in February, its best monthly gain since May 2021, according to the latest report from the World Gold Council.
Monday, the WGC said that the global gold ETF market saw net inflows of 35.3 tonnes, valued at $2.1 billion. The report noted that inflows were even split among North American and European-listed funds.
“Global net inflows were driven by stubbornly high inflation and a surge in geopolitical risk on the back of the Russian invasion of Ukraine, which pushed the gold price to an intra-month high of US$1,936/oz,” the analysts said in the report.
The WGC said North American funds saw inflows of 21.5 tonnes, with the market dominated by larger funds in absolute terms. Across the Atlantic, the report said that European funds saw inflows of 21.4 tonnes.
“The Russian invasion of Ukraine exacerbated inflation fears due to its implications for energy supply in the region. At the same time, sovereign bond yields declined towards the end of the month as projections for monetary tightening by the European Central Bank were delayed to 2023 in the wake of the conflict,” the analysts said.
Meanwhile, Asian-listed firms saw outflows of 7.4 tonnes.
“The bulk of these outflows were driven by Chinese ETFs likely due to tactical selling as the gold price surged, while local equity markets remained positive over the month,” the report said.
Looking ahead, the WGC does not expect investor appetite for gold to shift anytime soon, even as the Federal Reserve looks to start raising interest rates next week.
Analysts at the WGC said that although inflation continues to spiral higher, central banks will be limited in their action as Russia’s war with Ukraine creates significant uncertainty for the global economy.
“Any potential economic slowdown may limit the extent to which central banks can tighten monetary policy or the policy options available should further support be needed. The risk of a slowdown is particularly acute in Europe, given the importance of Russian energy supplies to the region,” the analysts said in a septate report also published Monday. “If expectations of interest rate rises were to soften further, and fears of stagflation re-emerge, this may further benefit gold investment demand.”
The WGC added that in a low interest rate environment, with rising inflation pressures, gold remains a better portfolio diversifier compared to bonds.
Rising inflation fears and geopolitical uncertainty pushed investors into gold-backed exchange-traded funds (ETFs), helping the price rise 6% in February, its best monthly gain since May 2021, according to the latest report from the World Gold Council.
Monday, the WGC said that the global gold ETF market saw net inflows of 35.3 tonnes, valued at $2.1 billion. The report noted that inflows were even split among North American and European-listed funds.
“Global net inflows were driven by stubbornly high inflation and a surge in geopolitical risk on the back of the Russian invasion of Ukraine, which pushed the gold price to an intra-month high of US$1,936/oz,” the analysts said in the report.
The WGC said North American funds saw inflows of 21.5 tonnes, with the market dominated by larger funds in absolute terms. Across the Atlantic, the report said that European funds saw inflows of 21.4 tonnes.
“The Russian invasion of Ukraine exacerbated inflation fears due to its implications for energy supply in the region. At the same time, sovereign bond yields declined towards the end of the month as projections for monetary tightening by the European Central Bank were delayed to 2023 in the wake of the conflict,” the analysts said.
Meanwhile, Asian-listed firms saw outflows of 7.4 tonnes.
“The bulk of these outflows were driven by Chinese ETFs likely due to tactical selling as the gold price surged, while local equity markets remained positive over the month,” the report said.
Looking ahead, the WGC does not expect investor appetite for gold to shift anytime soon, even as the Federal Reserve looks to start raising interest rates next week.
Analysts at the WGC said that although inflation continues to spiral higher, central banks will be limited in their action as Russia’s war with Ukraine creates significant uncertainty for the global economy.
“Any potential economic slowdown may limit the extent to which central banks can tighten monetary policy or the policy options available should further support be needed. The risk of a slowdown is particularly acute in Europe, given the importance of Russian energy supplies to the region,” the analysts said in a septate report also published Monday. “If expectations of interest rate rises were to soften further, and fears of stagflation re-emerge, this may further benefit gold investment demand.”
The WGC added that in a low interest rate environment, with rising inflation pressures, gold remains a better portfolio diversifier compared to bonds.
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Read More:Gold market sees inflows of 35.3 tonnes in global ETFs – WGC
2022-03-07 21:15:00
