According to the latest report from the World Gold Council (WGC), concerns about slowing US economic growth and rising inflation have prompted investors to turn to gold as a safe haven.
Since the beginning of the year, gold-based exchange-traded funds (ETFs) have recorded a stable flow of money. In March alone, cash flow increased sharply in all major regions.
According to the WGC, ETFs in North America account for 61% of total cash flow into gold, while Europe accounts for about 22% and Asia accounts for 16%.
Europe has been a weak link in the gold market in recent times, but now there are signs of catching up. Cash flow into European gold funds in the first quarter reached 4.6 billion USD - the highest level since the first quarter of 2020 - the report said.
In March alone, 92 tons of $8.6 billion worth of gold fell into global ETFs. In the first quarter, a total of 226 tons of gold (equivalent to $21 billion) flowed into ETFs - the second highest in history, after only the second quarter of 2020.
North American funds added 67.4 tonnes of gold in March. The WGC said demand still comes from familiar factors such as the steady increase in gold prices, the somewhat unstable economic and geopolitical situation.
In addition, the weakening of the stock market due to concerns about growth and decreased liquidity - in the context of central banks still tightening monetary policy - has further caused investors to seek gold as a safe asset.
In Europe, funds recorded an additional 13.7 tons of gold. The UK, Switzerland and Germany have all increased their holdings. Although the Bank of England did not change interest rates at its March meeting, the lackluster growth prospects, US tariff concerns and strong gold price movements have boosted demand in the UK.
In Germany, 10-year bond yields rose in early March due to a huge spending plan, but investors continued to buy more gold in expectation that the ECB would continue to ease, while risks from US tax policy remained present, the report said.
In Asia, funds recorded an additional 9.5 tons of gold. China and Japan led demand in March, largely due to strong gold prices outperforming other assets, and growing concerns about global trade policy, the WGC said.
Despite the current risk of unsustainable growth, the WGC believes the market is still well supported. The current level and speed of gold price increase has made many people compare it with previous peaks. However, we see that the current economic context is far different from those times, the report stated.
Investors are tending to keep gold longer and do not want to sell because the current policy situation is too unpredictable. This could create a strong push for gold prices.
Looking back at history, this increase is not large or prolonged. Even compared to the peaks in 2011 and 2020, the current gold price support platform is more solid, the WGC concluded.
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