New Delhi: Despite the price of gold hitting a new high, gold exchange traded fund (ETF) investors appear to be shunning the investment opportunity as major global funds have witnessed sizable outflows since the beginning of the year, S&P Global data showed on Thursday.
When looking across two of the largest gold related ETFs (by assets under management), GDX, Vaneck Vectors Gold Miners ETF ($13.26 billion) and GLD, SPDR Gold Trust ETF ($61.71 billion), year-to-date flows remain muted, with both funds only experiencing positive flows during two out of the first five months of the year. These two funds have collectively witnessed an outflow of $3.946 billion in the calendar year to date.
As per S&P Global, the majority of other funds have also witnessed a similar trend, with sizable outflows being seen since the beginning of the year.
“Given the current level of geopolitical risk, on-going conflict, and growing uncertainty regarding inflationary trends across a number of major global economies, central banks have reportedly been behind the recent spike in demand, pushing gold prices higher by circa 13% year-to-date,” the global rating agency said in a note.
As central banks embark upon a period of interest rate divergence, investors can also expect to see growing volatility in currency markets. As interest rates move, currencies either strengthen or weaken and gold is often used as a hedge against this risk, the rating agency noted.
“This may explain why exchange traded fund buyers may not be too enthusiastic about its recent increase in valuation,” S&P Global added.
Published 30 May 2024, 21:44 IST