Gold Market Structure and Trends

Japan’s inflation remains sticky, with labour shortages and higher commodity prices likely to keep cost pressures elevated. Meanwhile, surging JGB yields are increasing local portfolio risks. Gold should remain relevant for local investors both as an inflation hedge and portfolio risk diversifier

Global physically backed gold ETFs attracted US$18bn in August, marking the second-largest monthly inflow on record. Demand was driven primarily by North American- and European-listed funds, helping lift global gold ETF AUM by 16% to US$615bn while holdings rose 121t to a record 4,189t.

Gold is an attractive means of helping investors diversify their portfolios. Its relative scarcity supports its long-term investment appeal. But its market size is large enough to make it relevant for a wide variety of investors, from individuals to institutions and central banks.

Global physically backed gold ETFs attracted US$3bn of inflows in July, reversing two consecutive months of outflows. Demand was broad-based across all regions, led by Europe, while positive flows and a higher gold price lifted total global gold ETF AUM by 1% to US$530bn. Collective holdings rose by 23t to 4,068t.

Total gold demand, including OTC, was unchanged y/y at 1,269t in Q2. This took demand for the first half year to 2,522t (+2% y/y), with a record value of US$380bn.

India's gold demand eased in Q2 as elevated prices and policy measures weighed on volumes, although spending remained robust, reaching a record high for a second quarter. Jewellery demand proved resilient despite affordability pressures, while investment demand moderated following a strong run but remained above its long-term average. Supply fell to a six-year low, with ample inventories and increased recycling helping to meet market needs. Looking ahead, demand is likely to remain sensitive to price movements. However, festive and wedding-related purchases, coupled with continued investment interest, should provide support through the second half of the year.

Global physically backed gold ETFs recorded sizeable outflows of US$8.9bn in June, led by North America, reducing H1 net inflows to US$8bn. Despite the June setback, Asia posted its strongest H1 on record, attracting US$12bn, while North America was the only region to see outflows during H1 (-US$7.7bn).

Global physically backed gold ETFs saw modest outflows in May, shedding US$2bn as investors remained largely sidelined. Europe was the only region to record inflows (+US$334mn), while Asia (-US$1.2bn) and North America (-US$1.1bn) led outflows. The May decline pushed global gold ETFs’ total AUM 2% lower in the month to US$604bn. Meanwhile, holdings edged down to 4,121t, remaining just below the February peak of 4,176t.