Record Gold ETF Inflows Meet Rising Rate Wall
The world's gold-backed exchange-traded funds (ETFs) saw their second-largest monthly inflow ever in August, with about $18 billion pouring in. This massive surge pushed collective holdings to a record 4,189 tonnes and total assets to roughly $615 billion, according to the World Gold Council.
The most dramatic shift came from North American investors, whose net buying jumped from just $71 million in July to $7.7 billion in August, an astonishing 108-fold increase that occurred just weeks before the Federal Reserve's September meeting.
After months of outflows, U.S. investors piled back into gold en masse, one of the most powerful ETF surges on record. However, this momentum was short-lived, as spot gold immediately slid about 1.2% to around $4,240 an ounce after the Fed's interest rate hike.
The Federal Reserve's decision to raise its policy rate by 0.25 percentage point to a target range of 3.75%-4.00% signaled that it isn't finished tightening, with 16 out of 18 officials indicating they want more hikes this year.