January Records the Highest Inflows in Global Gold ETFs

As per the World Gold Council (WGC) report, in January, global gold exchange-traded funds (ETFs) recorded net inflows worth $2.7 billion (46.3 tonnes). In terms of tonnage, inflows stood at the highest since May 2021.

The gold price was marginally down in January, dipping less than 1% to $1,795 per ounce continually. Indian gold ETFs witnessed one-tonne worth outflows in January. It was primarily driven by increasing 10-year Indian government bond yields and anticipation for a more aggressive Fed stance. Total gold holdings in India stood at 37 tonnes towards the end of January.

WGC mentioned that retail demand remained low in India in January because covid-19 restrictions were reintroduced, and there were no auspicious wedding dates. Due to less demand, the local market was pushed into a $1-2 per ounce discount that eventually led to $2-3 per ounce by the end of January. The local gold price and anticipation towards tax changes concerning the gold metal in the 2022 Union Budget (there was no change in the tax rate for gold subsequently) kept the bullion offtake depressed.

Nevertheless, as per WGC, the retail demand is anticipated to improve in February since slowly COVID-19 cases are dipping, and there might be moderation in the gold price.

Globally, the highest inflows were seen in the largest North American funds, with a tiny increase in European fund holdings. Chinese funds led to Asian outflows as investors lessened gold holdings ahead of the Chinese New Year. At the end of January, Global holdings stood at $209 billion or 3,616 tonnes.

According to WGC, inflation rates and monetary policy will remain crucial for gold in the near term. Gold has regained its price in the initial days of February, resuming to about $1,800 per ounce level after the initial reaction to the recent Fed statement calmed down.

For any clarifications/feedback on the topic, don’t hesitate to contact the writer at bhavana.pn@cleartax.in.

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