Gold ETF Inflows Reverse as Fed Chair Warsh’s Comments Weigh on Gold Prices
The recent summer rally in gold, reflected by a rise of over 30% for GLDM since last year, has been disrupted following a hawkish speech from Federal Reserve Chair Kevin Warsh. The remarks increased the probability of a September rate hike to about 58%, causing gold prices and related ETFs like SPDR Gold MiniShares Trust (GLDM) to drop by around 3%. Despite this setback, global inflows into physically backed gold ETFs reached $3 billion in July, with Europe and Asia being major contributors. U.S.-based investors have remained largely absent from the buying trend. Warsh’s comments emphasized ongoing efforts against inflation, which led to a stronger dollar index near 118 and rising Treasury yields close to 4.67%. These factors increased gold's opportunity cost due to higher real yields, negatively impacting its appeal as an investment. However, structural support for gold remains from central bank purchases and continued weakness in the U.S. dollar, which historically has been a strong tailwind for bullion prices.
Topics: Fed commentary Gold ETFs Inflation concerns Investor sentiment