In 2024, global investors made a comeback with gold ETF flows after interest had waned due to the year gained. With gold prices at all-time highs 40 times and in the midst of their first positive annual flows since 2019, gold ETFs experienced $3.4 billion in inflows. This news explores the trends, drivers, and regional dynamics that inform the market.
2024 Gold ETF Highlights
- Record Assets Under Management (AUM): The total AUM rose 26% over the previous year, increasing to an all-time high of $271 billion.
- First Annual Inflows in Four Years: Socially responsible investors held an asset of $3.4 billion, though with slight reductions.
Strong Gold Price Performance: The gold prices had their best annual performance from 2010.
2024 Key Drivers of Gold ETF Flows
- Geopolitical Uncertainty
- Geopolitical events such as U.S. elections and global conflict have provided heightened tension to demand for safe havens.
- Political instability in France drove most of the European inflows.
- Central Bank Policies
- This made gold attractive as an investment to major central banks, which started easing cycles in response, as did expectations for the rate path.
- In addition to a huge drop in bond yields (yields on integrity bonds – bonds secured by the holding companies of a certain government) in Asia generally and China, gold investments were further spurred.
- Gold Price Rally
The strongest gold price rally in over a decade drove higher inflows and, more generally, increased trading activity across global markets.
December 2024: Positive turnaround of a Month
Overview
Gold ETF flows in December crossed the zero mark and turned positive after 2019 for a global total of $778 million. The outflows reversed a trend of the final months of previous years. Yet, even as gold prices declined by 1.5%, holdings rose to 4 tonnes, rising modestly to 3,219 tonnes.
Regional Trends
Asia:
- It was the lead recipient of inflows in December, with $748 million.
- China’s investors were looking for gold as a hedge against currency devaluation and economic uncertainty.
- India recorded its eighth straight month of inflows.
Europe:
- And France’s political instability drove solid $337 million inflows.
- FX hedging adjustments effectively offset gains from Switzerland but not so much outflows.
North America:
- It experienced mild outflows of $342 million.
- Gold was off-putted by rising U.S. Treasury yields and the dollar’s strength.
Other Regions
Other regions had limited activity and saw minor inflows of $35 million from Australia and South Africa.
Year in Review: Gold Trading Trends
Trading Volumes
- In December, world gold trading volumes averaged $221 billion daily, down 24% on November as volatility eased.
- Total 2024 trading volumes climbed +39% YoY to a record of $226.3b daily.
Futures Market
- Total net longs in COMEX gold futures fell 5% monthly to 764 tonnes in December.
- Net longs for 2024 averaged 555 tonnes, the highest since 2011.
Looking Ahead: Implications for 2025
Factors to Watch
Geopolitical Developments:
Gold could be sustained by continued uncertainty about global conflicts and U.S. political transitions.
Monetary Policies:
- Actions by central banks to lower their rates will affect investors’ sentiment on gold.
Market Volatility:
- Gold ETFs would continue attracting safe-haven investors as new market turbulence spreads.
Opportunities for Investors
Gold ETFs continue to be a good portfolio diversifying tool. Monitoring regional and global trends will be key to informed decisions in 2025.
Conclusion
We’ve had Gold ETF flows doing very, very well during 2024, in a sort of resurgence kind of way. The highly volatile market today illustrates market strength and, therefore, the potential for further growth given the record AUM and trading volumes. Investors will have to understand the drivers and regional dynamics in order to navigate the gold market in 2025 and thereafter.
