ETF Gold flows flipped modestly negative in May

Gold flows into ETFs reflected the range-bound gold price and were relatively flat in May. As the World Gold Council framed it, flows shifted “from a flood to a trickle.”

“Global gold-backed ETF investors remained largely sidelined in May as range-bound gold prices and renewed appetite for risk assets limited demand.”

Globally, ETF holdings fell by 16.2 tonnes. Europe was the only region to report positive flows.

At the end of May, ETFs globally held 4,121 tonnes of gold, slightly below the record high of $4,176 reached on Feb. 26 this year.

In dollar terms, global ETFs shed a modest $2 billion. Net outflows dropped total assets under management (AUM) by the gold-backed fund to $604 billion, a 2 percent decline.

North American ETFs reported an 8.5-tonne decrease in gold holdings, valued at $1.1 billion.

North American ETF flows have been muted since the March drawdown. According to the World Gold Council, this suggests “investors have moved to the sidelines while awaiting a clearer catalyst.”

“Beyond price action, the opportunity cost of holding gold has also risen amid U.S. dollar strength, higher rates, and adjusted expectations for the future path of U.S. rates. Inflation concerns linked to the U.S.-Iran conflict have added to uncertainty around the rate outlook, with some market commentators suggesting the Fed may need to remain restrictive for longer.”

As I have noted, this mainstream narrative seems to be ignoring the Debt Black Hole. It’s not going to be as easy to keep rates restrictive as some analysts seem to think.

World Gold Council analysts pointed out that tech ETFs have pushed gold ETFs aside in North American markets.

Europe was a different story. Gold-backed funds in the EU reported a 1.2-tonne increase in gold holdings, valued at $334 million last month.

Positive flows in the UK and Germany offset weakness in other European countries.

According to the World Gold Council, safe-haven demand supported by political uncertainty and concerns about the government’s fiscal situation drove gold ETF investment in the UK last month.

“At the same time, the second half of the month saw lower Gilt yields – helped by softer inflation and falling oil prices – which reduced the opportunity cost of holding gold and encouraged local ETF demand.”

There were similar dynamics in play in Germany. Lower oil prices drove optimism that the ECB will not hike interest rates.

Asian funds shed 8.8 tonnes of gold valued at $1.2 billion. It was the first decline in Asian ETF gold holdings since last August.

China drove outflows with a stronger yuan and weaker local gold prices, coupled with optimism about equities, weighing on gold.

Indian funds also reported modest outflows, ending a 12-month streak of gold accumulation. The majority of May’s outflows happened after the Indian government hiked the gold import tariff.

Gold holdings by funds in other regions, including Australia and Africa, were virtually unchanged. Outflows from Australia offset inflows from countries including South Africa.

ETFs are a convenient way for investors to play the gold market, but owning ETF shares is not the same as holding physical gold.

ETFs are relatively liquid. You can buy or sell an ETF with a couple of mouse clicks. You don’t have to worry about transporting or storing metal. In a nutshell, it allows investors to play the gold market without buying full ounces of metal at the spot price. 

Since you are just buying a number in a computer, you can easily trade your ETF shares for another stock or cash whenever you want, even multiple times on the same day. Many speculative investors take advantage of this liquidity.

But while a gold ETF is a convenient way to play the price of gold on the market, you don’t possess any gold. You have paper. And you don’t know for sure that the fund has all the gold either, especially when it sees inflows. In such a scenario, there have been difficulties or delays in obtaining physical metal.

Trading volumes

Gold trading volumes increased by 3 percent month-on-month in May to $243 billion per day. Volume remains about 15 percent above the 2025 average. According to the World Gold Council, this signals ample gold market liquidity, despite gold’s recent range-bound performance. 

Exchange-traded activity increased 6 percent to $175 billion per day. According to the World Gold Council, “This modest improvement was driven by higher COMEX activity but partially offset by a decline in Shanghai Futures Exchange volumes.”

Over-the-counter volumes inched higher by 1 percent to $243 billion per day. OTC activity is well above last year’s average of $180 billion per day.

There was a marginal 2.5 percent reduction in COMEX longs last month. Meanwhile, managed money positions increased in three of the four weeks in May. According to the World Gold Council, “Positioning continues to hover in neutral territory as investors await a clear near-term catalyst, while the long-term fundamental story remains intact.”