- According to the latest data released by the World Gold Council (WGC), global physical gold exchange-traded funds (ETFs) faced significant net outflows in May, with a monthly outflow of $2 billion. This outflow led to a 2% monthly decline in the total assets under management of global gold ETFs to $604 billion, with the overall physical holdings slightly decreasing by 0.4% to 4,121 tons. Despite the short-term withdrawal of funds, thanks to strong inflows in the first quarter of this year, the cumulative net inflow since the beginning of the year remains in a positive range, close to $17 billion.
- The flow of funds shows a clear cross-asset rotation and reassessment of risk preferences. In the context of gold prices being range-bound and lacking clear macro catalysts, many allocation investors have turned to a wait-and-see approach. Meanwhile, risk assets, represented by technology stocks, have regained favor with incremental funds, with technology ETFs recording the largest monthly net inflow since the beginning of the year in May, significantly diverting funds originally parked in the precious metals market.
- From a global regional perspective, the flow of funds shows extremely differentiated structural differences. The Asian and North American markets became the main forces of withdrawal in May. The Asian market recorded its first monthly net outflow since August 2025, with a total outflow of $1.2 billion; the North American region was suppressed by the delayed expectations of Fed rate cuts and a strong dollar, turning slightly negative for the month with an outflow of $1.1 billion. In contrast, the European market, due to regional political uncertainty and falling bond yields, attracted $334 million, becoming the only region globally to achieve net inflows.
Cross-Asset Rotation and Liquidity Reallocation
The core logic of the global market in May was the realization of macro consensus trades and the reallocation of funds. As the first-quarter risk-averse trades based on inflation stickiness and geopolitical games reached their target range, some institutional investors facing pressure to catch up with benchmark performance began reallocating liquidity in their portfolios to cyclical core assets like technology. The market's marginal pricing response to geopolitical risks has become muted, leading traditional safe-haven assets to lack sufficient premium support at this stage. This cross-asset liquidity shift directly constitutes the fundamental driving force behind the shrinkage of gold ETF funds in this round.
Regional Factors and Profit-Taking in the Asian Market
The Asian market showed significant performance in this round of withdrawal, with its internal driving factors being diverse. The weakening of domestic gold prices in China, the phased rebound of the RMB exchange rate, and the recovery of optimism in the equity market collectively weakened local investors' demand for hedging allocations in gold ETFs, forming the core part of the outflow in the Asian region. Additionally, in the Indian market, structural adjustments in official import duties triggered profit-taking operations within the market, resulting in a monthly outflow of $61 million, ending the region's previous 12-month trend of net inflows. This change in regional data reflects the immediate impact of local policies and exchange rate variables on precious metal pricing.
North American Macro Pricing and Opportunity Cost Considerations
The flow of funds in North America is deeply anchored to the Fed's monetary policy path and the risk-free rate center. During May, as expectations for short-term rate cuts continued to be lowered, the dollar index remained relatively strong, and U.S. Treasury yields stayed in a high range. This macro environment directly increased the actual opportunity cost of holding zero-yield assets. Under the "Higher for Longer" policy narrative of long-term high interest rates, institutional investors in the North American market generally tend to wait for more definitive macroeconomic indicators or liquidity inflection point signals, resulting in an $1.1 billion outflow in the region, with investment strategies overall shifting to defensive observation.
European Risk Aversion and Regional Premium
In stark contrast to the outflows in the U.S. and Asian markets, the European market became the only net growth engine for global gold ETFs in May, with a monthly inflow of $334 million. This counter-trend performance was mainly driven by marginal changes in the UK and German markets. Domestic political uncertainty in the UK and concerns about long-term fiscal deficits provided a solid regional demand base for gold as a safe haven. Meanwhile, the phased slowdown in European inflation data in late May and the pressure-induced decline in international oil prices led to a drop in long-term bond yields in the UK and Germany. This marginal easing of risk-free rates effectively reduced the holding costs for European investors, successfully guiding funds back into the precious metals market in a headwind environment.
