ETF Flows Lacking as Gold Price Surges to Two-Month High

Gold's price has rebounded sharply, but one key indicator suggests its rally may not be over yet. Spot gold rose about 0.6% to $4,376 an ounce on Friday after hitting a two-month high of over $4,449 the day before.

The metal's 10% increase in August is attributed to softer U.S. inflation, fading expectations for another Federal Reserve rate hike, a weaker dollar, and heightened geopolitical uncertainty.

However, data from The Chart Report shows that gold ETF shares outstanding remain below levels reached during previous market peaks. This lack of investor participation through gold ETFs could be a sign that the rally has room to run.

The World Gold Council also provides evidence of this trend, reporting that global physically backed gold ETFs added 23 metric tons in July, lifting holdings to 4,068 tons and assets under management to roughly $530 billion. This follows an uneven first half, where global gold ETFs suffered $8.9 billion of outflows during June.

Investors are now watching ETF flows as a key indicator of whether gold's rally can broaden. Continued inflows alongside falling rate-hike expectations would add another layer of demand on top of central-bank buying, which has already reached record levels.