Gold ETFs Hit Record Highs in 2024, Driven by Soaring Bullion Price and Global Uncertainties
The global gold exchange-traded fund (ETF) market reached unprecedented heights in 2024, with total assets under management (AUM) surging to a record $271 billion. This impressive 26% year-on-year growth was primarily fueled by a remarkable surge in the price of gold, which appreciated by 26% to reach approximately $2,629 per ounce. This marked the strongest annual gold price performance since 2010, with the yellow metal hitting new all-time highs on 40 separate occasions throughout the year. While the AUM growth was substantial, total ETF inflows remained modest at $3.4 billion. Significantly, however, this marked the first positive inflow in four years, signaling a renewed investor interest in gold-backed assets.
The surge in gold’s appeal can be attributed to a confluence of global factors that heightened investor uncertainty and boosted demand for safe-haven assets. The World Gold Council (WGC) highlighted several key drivers, including the tumultuous US election, escalating geopolitical tensions and conflicts across multiple fronts, and shifting expectations regarding future interest rate paths as major central banks embarked on easing cycles. These factors combined to create a perfect storm that propelled gold prices upwards and reignited investor interest in gold ETFs. The WGC’s analysis reveals a geographically diverse pattern in gold ETF flows, with Asia leading the charge, while Western investor appetite also showed signs of recovery, particularly in North America.
Despite the record AUM figures, collective gold ETF holdings experienced a slight dip of 7 tonnes over the year, settling at 3,219 tonnes. This contrast between rising AUM and declining holdings can be explained by the substantial price appreciation of gold, which contributed significantly to the overall increase in AUM value even as physical holdings experienced a minor decline. The WGC’s report provides a detailed breakdown of regional trends, revealing notable shifts in investor behavior and highlighting the varying impacts of local and global events on gold ETF demand.
The final month of 2024 witnessed a positive trend in gold fund flows, marking the first December inflow in five years. Total inflows for the month reached $778 million, equivalent to 4 tonnes, underscoring continued investor interest in gold as a safe-haven asset. However, this positive overall trend masked divergent regional performances. North American ETFs, which had experienced five consecutive months of inflows, recorded outflows of $342 million in December, reducing total AUM to $139 billion and physical holdings to 1,651 tonnes, a 5-tonne decline year-on-year. This shift was attributed to the US Federal Reserve’s hawkish signals despite a 25-basis-point rate cut, which led to rising US Treasury yields and a strengthening dollar, consequently weighing down on gold prices.
In contrast to the North American trend, European gold ETFs registered inflows of $337 million in December, bolstering total AUM to $108 billion. While physical holdings in Europe dipped marginally to 1,288 tonnes, the overall inflow trend reflected increased demand, particularly in France. The WGC attributed this surge in French demand to the ongoing political uncertainty surrounding the formation of a new government, highlighting the role of political instability in driving safe-haven flows.
Asian markets continued to exhibit strong demand for gold ETFs in December, with inflows of $748 million boosting AUM to $19 billion and physical holdings increasing by 9 tonnes to 216 tonnes. China played a leading role in this Asian surge, driven by plunging government bond yields, anticipation of further central bank rate cuts, and a weakening local currency fueled by concerns over a potential trade war with the US. This combination of economic and geopolitical factors significantly intensified local investor demand for safe-haven assets, including gold. The contrasting regional trends underscore the complex interplay of local and global factors driving the dynamics of the gold ETF market. The varying responses to interest rate expectations, currency fluctuations, and political uncertainties highlight the nuances of gold’s investment appeal across different geographical regions.
