Investor dollars seeping into gold exchange-traded funds (ETF) rounded out 2024 with their first global annual inflow – US$3.4 billion – in four years.
Gold ETF inflows, coupled with the commodity’s strongest annual price performance since 2010, pushed assets under management to a record high of US$271 billion by the year’s-end, according to the World Gold Council.
The year 2024 turned out to be stellar for the yellow metal, having enjoyed 41 new closing highs by the end of October and peaking at a record US$2,778 ($4,472) per ounce that same month.
And in December, flows of global gold ETFs flipped back to positive – marking a first since 2019 – adding US$778 million, with Asia and Europe leading the charge.
Thanks to strong Asian ETF buying, specifically, the council said this was able to significantly offset outflows in North America last month.
“Those outflows were quite benign given the weakness in November and the prospect of profit-taking following such a strong year. A positive sell-side outlook for gold probably helped constrain a bigger end-of-year shift out of gold,” it said.
“Profit-taking also likely occurred in futures, where somewhat extended managed money net longs shed US$4 billion (-49 tonnes) over the month, taking total net positions down to US$65 billion (764 tonnes).”
Looking at flows in Asia, the World Gold Council highlighted China’s lead in this area.
“Plunging government bond yields amid intensifying expectations of further rate cuts from the central bank and a weakening local currency on concerns of a potential trade war with the US drove up local investor safe-haven demand,” it said.
India also experienced its eighth consecutive month of inflows, driven by rising equity market volatility and bullish sentiment towards gold. However, this appears to be moderating.
Meanwhile, funds in other regions reported limited flows of US$35 million in December.
“This was driven by minor inflows from Australia and South Africa.”
“While Asia continued to lead inflows, Western investor appetite for gold improved with North American funds registering their first positive annual flow since 2020 and European outflows narrowing significantly compared to 2023.”
Notably, global gold trading volumes also jumped in 2024, reaching US$226.3 billion a day – this was 39 per cent higher than 2023 and the highest on the council’s record.
In fact, almost all markets saw peak volumes in value terms.
“Volumes at Shanghai Futures Exchange rose the most, reaching a record high. And these increases were not solely driven by the record-shattering gold price; volumes measured in tonnage also improved across all sectors,” the World Gold Council said.
Last week State Street Global Advisors said the yellow metal is poised for further gains this year, buoyed by an enthusiastic Asia-Pacific.
“Our base case is for gold to range between US$2,600 and US$2,900 in 2025, with the potential to rise to US$3,100 under certain economic scenarios,” the financial giant said.
However, the bull case for gold trading as high as US$3,100 per ounce would require multiple conditions to be met. Right now, State Street has this scenario pencilled in at around a 30 per cent probability.
“This occurs if US growth slows down enough to create weakness in the labour market, enabling the Fed to cut rates to 3.25 per cent to 3.5 per cent by the end of 2025,” it detailed.
This scenario would also need to see mostly positive gold ETF inflows year-round, central banks continuing with their gold-purchasing surge and consumer demand in Asia strengthening as lower rates weaken the US dollar.
On the other side of the coin, if US growth accelerates far more than expected, gold could backtrack to trade between US$2,200 and US$2,600, according to State Street.
