Gold prices have seen a significant increase since late 2022, with a rise of about 13% last year and a further 27% increase so far this year. Despite this upward trend, retail investors have largely missed out on the rally. According to data from Bank of America, there have been $24 billion in outflows from gold ETFs since their purchase peak in October 2020.
Notably, the SPDR Gold ETF (GLD, Financial), the largest physically-backed gold ETF, has experienced significant outflows. This marks the first time since the ETF's inception that retail investors have missed such a gold price increase. The SPDR Gold ETF, which manages around 876 tons of physical gold worth over $74 billion, saw its holdings peak in 2020 during the economic turmoil caused by the COVID-19 pandemic, as investors turned to safe-haven assets like gold.
Since October 2020, despite $24 billion in outflows, spot gold prices have surged by 39.4%, and the SPDR Gold ETF rose 37.6%. Spot gold even reached a record high of over $2,700 per ounce by late September. The Federal Reserve's rate cut uncertainties and geopolitical risks have propelled gold prices upward in 2023, further boosted by expected rate cuts in 2024.
Analyst Dani Schijveschuurder from Seeking Alpha notes that gold has outperformed the stock market, with a 50.5% gain compared to the S&P 500's approximately 34% return over the past three years. Real Investments highlights the potential for trouble if the U.S. debt-to-GDP ratio exceeds 132.8%, prompting investors to turn to gold. The U.S. Debt Clock indicates the ratio was 129.6% in Q3 and is expected to reach 133.80% by Q1 2026.
A weak dollar poses challenges for the U.S. government in financing its debt through bond sales, leading to higher borrowing costs and reduced demand, which could further bolster gold prices.
Meanwhile, the World Gold Council (WGC) reports that gold ETFs have seen inflows for the fifth consecutive month as of September, driven mainly by North American funds increasing their holdings. This month, gold ETF inflows totaled 18.4 metric tons, equivalent to about $1.4 billion, raising global ETF holdings to 3,200 metric tons. The rise in gold prices and recent inflows led to a peak of $270.9 billion in assets under management at the end of September.
The WGC also highlighted a 7% month-over-month increase in global gold trading volume in September, reaching $259 billion daily, with a 10% rise in over-the-counter market volume to $176 billion. As gold prices climb by 28% this year and with anticipation of future U.S. rate cuts, speculative net long positions on COMEX increased by 6% at the end of September, reaching their highest levels since February 2020.
