Inflows into gold exchange-traded funds (ETFs) are expected to rise sharply as Western investors increase exposure to the precious metal. Analysts predict that growing demand will further boost gold prices, which have already climbed 27% this year to a record $2,600 per ounce. Geopolitical tensions and recent interest rate cuts by central banks in the US, Europe, and China are driving optimism for even higher prices, with some forecasting a potential peak of $3,000 per ounce.
Gold ETFs offer investors exposure to gold without the need to hold the physical commodity. These funds are backed by physical gold, meaning that increased investment in ETFs tightens the supply of gold available in the market, driving prices upward. Standard Chartered analysts anticipate accelerated inflows into ETFs as central banks maintain their easing policies, supporting the next phase of the gold price rally.
Recent data from the World Gold Council (WGC) shows global gold ETFs recorded inflows of 28.5 tonnes, or $2.1 billion, in August. North American funds contributed the most, adding 17.2 tonnes, or $1.4 billion, during the month. Softer US economic data, dovish Federal Reserve comments, a weaker dollar, and declining yields have all bolstered gold demand. Notably, North America has seen a resurgence of interest in ETFs over the past two months, complementing earlier inflows from Europe.
Major financial institutions, including J.P. Morgan, Goldman Sachs, Citi, and UBS, have reiterated their bullish outlook on gold. Goldman Sachs highlighted that rate cuts by the Federal Reserve are drawing Western capital back into gold ETFs, a trend that has been absent in recent years. J.P. Morgan emphasized that retail-focused ETF inflows will be critical for sustaining the rally and predicts gold could reach $2,850 by 2025.
Spot gold recently hit a new high of $2,639.95 per ounce, reflecting investor confidence in further monetary easing and the metal's safe-haven appeal amid geopolitical and economic instability. Lower interest rates reduce the opportunity cost of holding gold, making it an attractive option during periods of market uncertainty.
Despite strong demand, Saxo Bank's Ole Hansen notes that the willingness of investors to buy at current elevated prices remains uncertain. Nevertheless, with continued interest rate cuts and robust ETF inflows, analysts believe gold's upward momentum is far from over.
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