Banking crisis fuels gold ETF inflows
Gold touched $2,062.99/oz on 4 May, the highest intraday level since March 2022, as renewed concerns about the US banking sector fuelled bets that the Fed may have to cut rates sooner than anticipated. The precious metal is nearing its all-time high of $2,075.47/oz made in August 2020 following Russia’s invasion of Ukraine.
Gold has rallied from around $1,630/oz in early November to above $2,000/oz with investors betting the Fed is moving closer to ending its rate hiking cycle.
The recent rally in gold prices began towards the end of the first quarter following the collapse of Silicon Valley Bank. Nervousness over the banking system, along with the weakening of the US dollar and falling Treasury yields have seen the precious metal rally more than 10% since early March.
Concerns over the US banking crisis fuelled gold ETF inflows in March. Global gold ETFs, led by European funds, saw US$1.9bn (+32t, +0.9%) of net inflows in March, putting a stop to a nine-month losing streak, data from the World Gold Council showed.
Overall, global gold ETF total assets under management (AUM) rose by 10%, aided by both inflows and the gold price appreciation, to US$220bn by the end of March. Gold holdings increased by 32 tonnes to 3,444 tonnes. And that positive trend has continued into April.
However, March inflows were not enough to reverse negative flows in January and February, resulting in a net outflow of US$1.5bn during the first quarter of 2023.
Looking forward, we believe financial stability concerns following the failure of some large US regional banks and fading interest rate headwinds will provide a positive tailwind for gold demand.
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