The latest report from the World Gold Council (WGC) shows that for the first time in the past year, gold exchange-traded funds (ETFs) have recorded net inflows as investor sentiment has fluctuated, affecting global financial markets.
Despite recent fluctuations, WGC analysts expect prolonged economic uncertainty, especially related to global trade tensions, to continue to support gold prices, even as stagflation risks (depression combined with inflation) increase.
In its monthly ETF report released on Thursday, the WGC said global gold ETFs have experienced outflows of 19.1 tonnes, equivalent to $1.83 billion. These flows are largely from North American funds as investors react to fluctuating tariff threats.
According to the report, 15.6 tonnes of gold, worth $1.5 billion, have been withdrawn from North American listed funds.
The better-than-expected temporary tax cuts between the US and China have improved investor risk appetite, leading to a strong recovery in stock indexes but reducing safe-haven demand for gold, said analysts.
Looking ahead, the WGC warned that the current neutral monetary stance of the US Federal Reserve (FED) could be an unfavorable factor for gold this summer. However, analysts also pointed out that these risks could be mitigated by concerns about inflation and unsustainable debt.
The market is now expecting higher interest rates by the end of 2025, leading to rising US Treasury yields and increasing the opportunity cost of holding gold. Although higher US Treasury yields often have a negative impact on gold ETF demand, current developments are not necessarily bad news. For example, growing concerns about stagflation could make investors look to gold, as gold typically performs well at such levels, the report said.
In contrast to the global trend, ETFs listed in Europe recorded modest inflows of 1.6 tons, worth 224 million USD.
The WGC noted that French ETFs are leading capital flows into Europe, as investors seek protection against sluggish economic activity, weak consumer sentiment and concerns about national debt and rising geopolitical uncertainty.
The biggest surprise in the report came from Asia, where the region recorded its first net outflows since November 2024. Asian ETFs reported net withdrawal capital of 4.8 tons, worth $489 million.
The pullback comes after a record month of ETF demand in April, with gold holdings rising 69.6 tonnes, the highest level ever.
Looking ahead, the WGC continues to see upside potential for gold, noting that the global trade war and rising tariffs have not significantly increased inflation. Some analysts say it could take up to six months for consumers to fully feel the effects of the trade conflict.
As inflation erodes real yields and growth slows to hit stocks and cyclical goods, the WGC said gold could remain one of the least- hit assets in a stagflation environment.
However, we do not necessarily have to wait for such an environment to happen. Additional analysis shows that expectations of recession combined with inflation are almost strong in driving gold's outstanding average performance, whether we get there or not, the analysts added.
