Physically-backed gold exchange-traded funds (ETFs) saw investments increase to a 34-month high in February, totalling $9.4 billion with positive inflows in North America and strong demand in Asia, the World Gold Council (WGC) said.
February marked the third straight month of inflows, coupled with a gold price uptrend, lifting total assets under management (AUM) to a record $306 billion. The holdings increased to 3,353 tonnes, the highest month-end level since July 2023, the WGC said.
$300 b daily trade
Trading activities across global gold markets increased in February, ending the month at roughly $300 billion a day on average. OTC trading, dominated by the LBMA, rose further as dealers moved gold in response to the US tariff concerns.
Gold futures trading volumes on COMEX declined, but the Shanghai Futures Exchange saw a sizable increase, given the strong local gold price performance. Gold ETF trading activities also rose, led by North America.
Total net longs of COMEX’s gold futures fell 13 per cent month-on-month to 832 tonnes by the end of February. Net long positions of money managers dropped 16 per cent, ending the month at 605 tonnes.
Nonetheless, the long positions are still 9 per cent above the 2024 average of 556 tonnes.
Indian pace slows
According to WGC, Asian investors bought gold ETFs aggressively in February, collecting $2.3 billion. Despite positive equity market sentiment – particularly around AI stocks amid the DeepSeek frenzy – the surging local gold price in China was attention-grabbing.
Indian gold ETFs maintained healthy inflows, albeit at a reduced pace compared with January’s record levels. Japan saw inflows for the fifth consecutive month. Funds in other regions added $159 million, their third consecutive monthly inflow.
North American demand surged in February, adding $6.8 billion. This was the largest single-month inflow for the region since July 2020 and the strongest February ever. The positive gold market momentum also benefited North American gold ETFs.
Other factors
Europe saw modest inflows of $151 million in February. The UK saw mild outflows, while Germany and Switzerland continued to book gains. Despite the Bank of England’s 25 basis points cut in the month, the faster-than-expected inflation acceleration in January may have cooled investor expectations for further cuts and pushed local yields higher.
In contrast, expectations for continued cuts from the European Central Bank this year have intensified amid the on-course disinflation progress and slower growth. This might have been a key factor underpinning inflows into other European gold ETFs. Additionally, heightened uncertainty during the run-up to the German federal election in late February may also have provided support.
The WGC said there were other important contributors to the inflows in February. For instance, US Treasury rates trended down with various economic signals flashing red.
Equity pull-back
Lower yields, alongside a weaker dollar, boded well for the gold price during most of the month – in fact, it reached nine new record highs in February before moving lower in the latter half.
“We believe reduced opportunity costs and a record-shattering gold price were key in attracting inflows. Moreover, a pullback in equity markets and fears of stagflation were also likely positive drivers of demand. Lastly, we have observed significant inflows triggered by gold ETFs’ options expiry, signalling further bullish sentiment from investors,” the WGC said.
“While we would not be surprised to see a slowdown in momentum, ongoing recession concerns and policy uncertainties – geopolitical and economic – will likely continue to provide a supportive floor for demand,” it said.