Gold stocks ETFs under pressure due to rising interest rates

Global gold stocks of ETFs fell by nearly 85 tonnes last month, according to the World Gold Council. Due to rising interest rates, the gold price was under pressure in February, causing some investors to reduce their positions in gold. At the end of February, these investment products had 3,618 tonnes of gold under management worldwide, representing a market value of more than $200 billion. Last year, a record amount of gold flowed into ETFs, despite outflows in November and December.

It was mainly American investors who sold precious metals. North American funds withdrew 71.2 tonnes of gold from the vault in February, while European funds sold 23.8 tonnes of gold. It is striking that investors in Asia actually stepped in due to the price drop, as the funds in this region added 10.6 million euros to their position last month. The last time Asian gold funds recorded significant asset inflows was in September last year. In China, interest in gold ETFs increased due to Rising premiums on Physical investment gold and a correction in the stock market.

Investors withdrew assets from gold ETFs in February

Gold Stocks ETFs

Global gold stocks of ETFs rose to record highs last year, driven by extremely low interest rates and large-scale support programs from central banks and governments. This further fueled fears of currency depreciation and therefore caused a flight to precious metals. Gold stocks even rose to record highs in September, as we wrote earlier in This article. At the end of last year, the gold price came under pressure due to the arrival of new vaccines against the coronavirus and rising interest rates. In November and December, that led to a decline in ETFs' gold stocks.

The Gold price has fallen in recent months, even reaching its lowest level in almost a year last week. This is despite the fact that inflation is rising and central banks are prepared to provide more stimulus if necessary. And although the economic outlook is improving, there is still uncertainty about a possible increase in the number of bankruptcies. When governments phase out their support measures, many companies can run into problems. This could have a negative impact on bank balance sheets and employment. As a result, gold remains a Valuable addition to an investment portfolio, especially in a world with negative savings rates.

Gold stocks ETFs rose to record highs last year

This contribution was made from Geotrendlines