Global physically backed gold exchange traded funds (ETFs) lost $6.7 billion in the first half of calendar year 2024 (H1-CY24), the lowest first half in a calendar year since 2013, according to a recent World Gold Council (WGC) report. According to the data, total holdings have decreased by 120 tonnes (-3.9%) to 3,105 tonnes throughout this time period.

"While Asian funds attracted a record $3 billion during the first half of 2024 (H1-CY24), they were significantly outpaced by collective outflows in North America and Europe to the tune of $9.8 billion," the World Bank reported.

According to the survey, Western gold ETF investors did not react as expected to the rise in the gold price, which typically drives up investment flows, despite rising interest rates and a more risk-on mood fueled by the AI boom.

"In contrast, Asian flows rhymed with the price strength - weaknesses in non-dollar currencies and gold's staggering performance in those currencies attracted investors in the region," the WGC reported.

WGC defines gold ETFs as regulated securities that contain actual gold. These include open-ended funds that trade on regulated exchanges, as well as closed-end funds and mutual funds. WGC tracks gold ETF assets in two ways: the amount of gold held (usually measured in tonnes) and the value of those holdings in US dollars (AUM). They also track how these fund assets evolve over time by examining two crucial metrics: demand and fund flows.

Asia is an Oddity

According to WGC, Asia was an outlier, with inflows of $3.1 billion in H1-CY24, surpassing all other markets and being the only area to have positive flows.   "This is the strongest first half for Asian funds in history, owing primarily to record-breaking inflows into China and Japan. Supported by record-breaking inflows and a stronger gold price, Asian funds' total AUM hit $14 billion, the biggest ever, while collective holdings grew by 41 tonnes," WGC reported.

WGC said that North America experienced $4.9 billion in outflows during the first half of the year, the highest in three years. However, the report stated that a 13% gain in the gold price during the first half of the year resulted in a 7.7% increase in North America's total assets under management.

European funds experienced their lowest performance since 2013 (-$8 billion). Despite a 6% drop in holdings, WGC reported that the overall AUM of European funds increased by 6.3% in the first half, owing to higher gold prices.

Two in a Row

Global physically backed gold ETFs received $1.4 billion in June, marking the second straight monthly inflow, according to WGC. All regions witnessed growth except North America, which suffered a slight loss ($573 million) for the second consecutive month. 

"In general, lower yields in key regions and non-dollar currency weaknesses increased gold's allure to local investors," according to WGC.

European funds added $1.4 billion in June, bringing Europe's H1-CY24 outflow to $4.9 billion. According to WGC, the region's central banks followed a different course than the US Fed, which boosted their performance.

For example, in June, the European Central Bank (ECB) announced its first rate decrease in nearly five years, while the Swiss National Bank slashed rates for the second time in 2024. In the United Kingdom, the Bank of England (BoE) hinted at a possible rate cut, but kept rates steady after a surprise general election announcement. "Lowering yields were a major driver of the region's (Europe) inflows in June. Furthermore, declining equities and political uncertainty surrounding elections in the United Kingdom and France, which triggered significant inflows, fueled investor interest in gold, according to the WGC report.