Gold ETF Inflows Continue Despite Fed Rate Pressure
Physically backed gold ETFs have seen net inflows for ten consecutive weeks, even as rising U.S. bond yields put pressure on the precious metal's price.
Despite pressure from U.S. Federal Reserve interest rate hikes, which led to a roughly six percent correction in gold prices in September, investors are continuing to buy gold ETFs. This trend has drawn market attention, as physically backed gold ETFs have reported net inflows for ten consecutive weeks. According to the World Gold Council, this sustained interest in ETFs is occurring while yields on U.S. 10-year Treasury bonds have reached near-record highs.
Investor behavior, however, shows regional differences. U.S. investors sold off $683 million in gold holdings last week, reacting to domestic interest rates. Meanwhile, investors from the United Kingdom, Switzerland, Canada, and China have been purchasing gold, balancing the global market. Although the inflow of new investments is weaker than in August, it has not ceased despite significant headwinds.
The decline in gold prices has been influenced by developments in the U.S. bond market, where the yield on 10-year Treasury bonds has risen to approximately 5.3 percent. This high yield increases the opportunity cost of holding gold, thereby reducing its attractiveness. The spot price of gold has fallen to around $4,170 per ounce, despite reaching a peak of over $5,600 earlier this year.
However, several factors are supporting the price. Central banks continue to accumulate gold on a large scale, with China's central bank, for example, significantly increasing its holdings. Additionally, physical demand from Asia, particularly during India's wedding and festival season, helps cushion selling pressure from institutional investors. Geopolitical uncertainties are also increasing demand for gold as a safe-haven asset.