Physically-backed gold exchange-traded funds (ETFs) experienced a surge in investments during February, reaching a 34-month high of $9.4 billion with positive inflows in North America and strong demand in Asia, according to the World Gold Council (WGC).
February marked the third consecutive month of inflows, coinciding with an upward trend in the price of gold, which pushed total assets under management (AUM) to a record $306 billion. The total holdings climbed to 3,353 tonnes, the highest level since July 2023.
Trading activity in global gold markets also saw an increase in February, averaging around $300 billion per day. Over-the-counter (OTC) trading, led by the LBMA, saw a rise as dealers adjusted their gold holdings due to concerns over US tariffs.
While gold futures trading volumes on COMEX declined, the Shanghai Futures Exchange witnessed a significant increase in trading activity, driven by the strong performance of the local gold price. Additionally, gold ETF trading activities saw growth, particularly in North America.
Despite a 13% month-on-month decrease in total net longs of COMEX gold futures to 832 tonnes by the end of February, money managers reduced their net long positions by 16%, ending the month at 605 tonnes. However, these long positions remained 9% above the 2024 average of 556 tonnes.
In terms of regional demand, Asian investors aggressively purchased gold ETFs in February, accumulating $2.3 billion. Indian gold ETFs saw healthy inflows, though at a slower pace compared to January’s record levels. Japan experienced inflows for the fifth consecutive month, while other regions added $159 million in their third straight monthly inflow.
North American demand surged in February, with inflows totaling $6.8 billion. This marked the largest single-month inflow for the region since July 2020 and the strongest February ever, driven by positive momentum in the gold market.
Europe witnessed modest inflows of $151 million in February, with the UK experiencing mild outflows while Germany and Switzerland continued to see gains. Despite the Bank of England’s 25 basis points cut, faster-than-expected inflation in January may have tempered investor expectations for further cuts, leading to higher local yields.
Overall, various economic signals, including lower US Treasury rates and concerns over stagflation, contributed to the strong demand for gold in February. The World Gold Council anticipates continued supportive factors for gold demand, citing ongoing recession concerns and geopolitical uncertainties.
