Global investors added a net $1.91 billion to gold ETFs last week, extending a 13-week buying streak. Despite high US bond yields and expectations of further interest rate hikes, gold remains popular as a hedge against uncertainty. Investors should watch how US inflation and festive seasonal demand in India shape future price movements.
Global investors have added money to gold exchange-traded funds (ETFs) for 13 weeks in a row. Last week alone, net investments reached $1.91 billion after accounting for redemptions. This sustained buying streak highlights the role of gold as a safety net for portfolios, even as the global economy faces difficult conditions like high inflation and potential interest rate hikes in the US.
Gold has a unique relationship with interest rates. Gold pays no interest, so when US government bond yields are high—currently sitting above 5.1 per cent—it is generally harder for gold prices to rise. This is because investors often prefer assets that generate regular interest income. Additionally, the market currently sees a 90 per cent probability of a US interest rate hike in December. This environment creates pressure on gold prices, as higher rates increase the cost of holding an asset that does not pay a return.
Despite this pressure, the consistent inflow suggests that many institutional and retail investors are choosing to prioritize safety over interest income. They appear to be using gold as a hedge against geopolitical instability and stubborn inflation. The demand has been strongest in the US and China, while European markets have seen a more mixed response.
In the Indian market, this global trend is relevant as the country prepares for the festive season. With Dhanteras approaching, demand for physical gold typically rises. For many Indian investors, Gold ETFs have become a preferred way to gain exposure to the metal. They offer advantages over physical gold, such as high liquidity, guaranteed purity, and lower storage costs. While global prices are influenced by the US dollar and bond yields, local demand often provides a degree of support for gold within India.
Looking ahead, investors should keep a close watch on incoming US economic data, such as job claims and inflation reports. If US economic data remains strong, it could force the Federal Reserve to keep interest rates high, which may put further pressure on gold prices. Conversely, if central banks continue to buy gold for their reserves, or if global uncertainty increases, it may act as a supporting factor for the metal. Tracking these developments, alongside seasonal festive demand, will be important for understanding the next phase of price movement.