Investors have added $1.72 billion to gold-backed ETFs over the past week, marking ten straight weeks of net inflows even as prices face pressure. While rising US interest rates dampen gold's appeal, seasonal demand in India and buying in other regions keep interest alive.
Gold exchange-traded funds (ETFs) have continued to attract investment for the tenth consecutive week, despite a period of sharp price drops in the global bullion market. Last week, investors poured $1.72 billion into gold products globally. While there were also redemptions of $1.59 billion, the net result remained positive, showing that many investors are holding onto their gold exposure despite market turbulence.
Impact of Rising US Interest Rates
The price of gold has struggled recently, falling roughly 26% from its January peak of $5,608 per ounce to around $4,150 early this week. Much of this pressure comes from the United States, where 10-year Treasury yields have climbed toward 5.50%. When government bonds offer higher interest rates, investors often shift their money away from assets like gold, which do not pay any interest or dividends. Furthermore, market expectations that the Federal Reserve may hike interest rates again in October have strengthened the dollar, making gold more expensive for international buyers and weighing on its status as a safe haven.
A Tale of Two Markets
There is a notable divide in how different regions are approaching gold right now. US-based investors have been net sellers, liquidating $683 million in holdings last week as they react to domestic economic data and the changing interest rate environment. In contrast, investors in the UK, China, Switzerland, and Canada have provided a steady floor of support, actively adding to their positions. This geographic split suggests that while the US is reacting heavily to macroeconomic policy shifts, international demand remains more resilient.
The Indian Seasonal Factor
For investors in India, the gold market often follows different patterns compared to Western institutions. The upcoming wedding and festival cycle is expected to bring a seasonal rise in demand for physical gold. This local demand often acts as a balance against institutional selling. As jewellery retailers and households prepare for the peak buying season, the local market may see different trends compared to global ETF flows.
What Investors Should Track Next
Market watchers are currently focused on key US economic updates, including manufacturing data, non-farm payroll reports, and PCE inflation indices. These indicators will be crucial in determining whether the Federal Reserve changes its interest rate path, which will directly impact gold's price direction. Investors may also monitor whether the current inflow streak in ETFs can hold if price volatility persists or if institutional selling spreads beyond the US market.