World's top gold ETF sees holdings surge in bullish demand sign

Gold just got a very bullish sign from investors who are returning to the precious metal in a big way as SPDR Gold Shares, the largest bullion-backed exchange-traded fund, on Friday recorded its biggest net inflow in dollar terms since listing in 2004 — worth $1.63 billion. Changes in ETF holdings are monitored as a gauge of investor interest in longer-term bets on gold. Holdings declined in 2021, a lackluster year for gold prices.

The jump comes before this week’s pivotal Federal Reserve meeting, which economists expect will signal a March start for rate hikes. Even as the Fed gets ready to tighten, which could dampen the appeal of noninterest-bearing bullion, demand for the haven is getting support from the drop in equities, U.S.-Russia tensions over Ukraine, and the plunge in Bitcoin.

In tonnage terms, Friday’s net inflow was 27.6 tons. Meanwhile hedge funds trading the Comex cut back their bullish bets to a five-week low in the week through to last Tuesday.

“We find it very surprising that the gold price has failed to profit from the robust ETF inflows,” Daniel Briesemann, an analyst at Commerzbank AG, wrote in a note. “This week will presumably see market participants focusing mainly on the meeting of the U.S. Fed”

Gold had an unremarkable 2021 after hitting a record in 2020. With global central banks starting to reduce pandemic-era stimulus, and Covid-19’s omicron variant less damaging than feared, investor enthusiasm for bullion has wavered. Last year, the SPDR gold ETF posted its biggest annual outflow in tonnage terms since 2013.

On Monday bullion climbed 0.3% to $1,840.63 an ounce by 1:43 p.m. in London, supported by easing Treasury yields. The Bloomberg Dollar Spot Index strengthened 0.4%. Silver declined, platinum edged lower, and palladium gained.