#Gold ETFs see record inflows, but high interest rates are still weighing on prices
Gold is showing a striking divergence: investors keep buying, but prices are pulling back.
Global gold ETFs saw net inflows of about $10 billion in September, and the third quarter set a quarterly record of $31 billion. Global gold ETF holdings rose to 4,256 tonnes, a record high.
Yet gold fell 8.5% in September, briefly nearing a two-month low on October 8, before rebounding to around $4,140 most recently. What’s really weighing on gold isn’t investors pulling out, but strong Treasury yields and the dollar.
What does this mean?
I think gold is currently in a phase where “long-term allocation demand remains strong, but the short-term macro environment is unfavorable.” Continued ETF inflows show that institutions haven’t given up on gold, but 10-year Treasury yields of around 5.3% raise the opportunity cost of holding a non-yielding asset.
So the key for gold going forward isn’t whether ETFs will keep buying, but when long-term Treasury yields will peak. If yields start to fall, the ETF inflows that have been steadily building could once again help drive gold prices higher.
This also offers a useful reference point for BTC: if Treasury yields and the dollar weaken together, liquidity pressures on global risk assets could ease, potentially channeling investor preference toward BTC as well.
Do you think gold’s decline is a normal correction in a bull market, or are high interest rates changing the pace of its rally?
Gold is showing a striking divergence: investors keep buying, but prices are pulling back.
Global gold ETFs saw net inflows of about $10 billion in September, and the third quarter set a quarterly record of $31 billion. Global gold ETF holdings rose to 4,256 tonnes, a record high.
Yet gold fell 8.5% in September, briefly nearing a two-month low on October 8, before rebounding to around $4,140 most recently. What’s really weighing on gold isn’t investors pulling out, but strong Treasury yields and the dollar.
What does this mean?
I think gold is currently in a phase where “long-term allocation demand remains strong, but the short-term macro environment is unfavorable.” Continued ETF inflows show that institutions haven’t given up on gold, but 10-year Treasury yields of around 5.3% raise the opportunity cost of holding a non-yielding asset.
So the key for gold going forward isn’t whether ETFs will keep buying, but when long-term Treasury yields will peak. If yields start to fall, the ETF inflows that have been steadily building could once again help drive gold prices higher.
This also offers a useful reference point for BTC: if Treasury yields and the dollar weaken together, liquidity pressures on global risk assets could ease, potentially channeling investor preference toward BTC as well.
Do you think gold’s decline is a normal correction in a bull market, or are high interest rates changing the pace of its rally?