Gold investment saw a significant surge in 2024, with ETF assets under management (AUM) jumping by a whopping 26%, according to the World Gold Council's reports.

Gold investment saw a significant surge in 2024, with ETF assets under management (AUM) jumping by a whopping 26%, according to the World Gold Council's reports.

Gold-based exchange-traded funds (ETFs) experienced unprecedented growth in 2024, reaching an astounding $271 billion in total assets under management (AUM). This represented a staggering 26% year-over-year increase, primarily driven by the surging bullion price [1][2].

The modest inflows of $3.4 billion into these ETFs marked the first positive result in four years. The World Gold Council (WGC) reported that while Asia continued to lead inflows, Western investor appetite for gold improved substantially. North American funds witnessed their first positive annual flow since 2020, and European outflows narrowed significantly compared to 2023 [2].

However, the total gold holdings dipped by seven tonnes during the year, settling at 3,219 tonnes [2].

The WGC attributed the improved gold ETF flows to several factors in 2024. These included heightened uncertainties caused by the dramatic U.S. election, widespread conflicts, changing expectations of future rate paths, and the strongest annual gold price performance since 2010 [2].

Gold ETFs witnessed a robust end to the year, recording positive inflows of $778 million, or four tonnes, in December – marking their first December inflow in five years [2]. This was achieved despite North American ETFs experiencing outflows of $342 million, reducing AUMs to $139 billion.

Despite an anticipated 25 basis point rate cut, the U.S. Federal Reserve adopted a hawkish stance, resulting in fewer rate cuts projected for 2025 and a surge in U.S. Treasury yields. The Fed's hawkish signal, coupled with stubborn inflation, weighed down on the gold price and led to gold ETF outflows [2].

European and Asian funds, however, recorded impressive inflows in 2024. Funds in Europe saw inflows of $337 million, pushing AUMs to $108 billion, while physical holdings dropped fractionally to 1,288 tonnes. The ongoing political turmoil in France contributed to the increased demand for gold ETFs in Europe [2].

Asian funds added nine tonnes of gold to their holdings, taking cumulative holdings to 216 tonnes. The region saw inflows of $748 million, which propelled total AUMs to $19 billion. China led the way with significant fund inflows last month due to plummeting government bond yields, intensifying expectations of further rate cuts from the central bank, and a weakening local currency due to potential trade war tensions with the U.S. [2].

Enrichment Insights:

1. Market volatility, geopolitical risks, and increased investor demand for safe-haven assets like gold contributed to the boom in gold ETF inflows in 2024 [1][2].
2. Central banks, including the Reserve Bank of India, emerged as significant buyers of gold in 2024, adding to the general demand for gold ETFs [1][5].
3. Favourable tax revisions in the Union Budget of India boosted investor interest in gold ETFs during the year [1].
4. Global uncertainties and the bullish sentiment surrounding gold further boosted investor demand for gold ETFs [1][2].
5. Volatility in domestic and global equity markets led investors to diversify their portfolios by investing in gold ETFs [1][3].
6. Multi-asset funds saw a spike in inflows, which contributed to the overall increase in gold ETF inflows, as their net inflows nearly doubled in the year [1].

The World Gold Council (WGC) played a significant role in reporting the improved gold ETF inflows in 2024, attributing the growth to various factors such as election uncertainties and bullion price performance [2]. Despite the positive trends, the World Gold Council also reported a slight dip in total gold holdings during the year [2].

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