The global gold ETF market cooled rapidly in May following a robust recovery in April.
According to a recent report published on June 4 by the World Gold Council, global physically-backed gold ETFs recorded a net outflow of $2 billion in May, marking a clear reversal in recent fund flow trends. This dragged down the total global gold ETF assets under management by 2% month-on-month to $604 billion, while collective holdings dipped slightly by 0.4% to 4,121 tonnes, still marginally below the all-time high of 4,176 tonnes set on February 27 this year.
Key Drivers of Outflows
The outflows were primarily driven by Asia and North America, which saw withdrawals of $1.2 billion and $1.1 billion, respectively. Europe was the only region to record net inflows, attracting $334 million during the month. Despite the net outflow for the single month, global gold ETF flows for the year-to-date remain in positive territory, with cumulative net inflows approaching $17 billion.
Investor Caution Amidst Range-Bound Prices
Gold prices traded sideways in May, lacking a clear directional catalyst, which led many investors to adopt a wait-and-see approach. Concurrently, riskier assets such as technology stocks regained investor favor, with global tech-focused ETFs recording their largest monthly net inflow since the start of 2024. Gold ETFs clearly fell behind in this competition for asset allocation.
The World Gold Council noted that as the macro consensus trades, including gold, were largely realized in the first quarter, some investors who missed the rally or needed to catch up to benchmark performance have rotated funds back into pro-cyclical sectors like technology. The market's reaction to the risk of escalating Middle East tensions has been relatively muted so far, failing to provide substantial support for safe-haven demand.
North American Market: Rising Opportunity Costs Weigh on Demand
The North American region turned slightly negative in May, with net outflows of $1.1 billion. The report indicated that fund flows in the region have remained sluggish since gold prices entered a consolidation phase after their March pullback, suggesting investors are awaiting clearer signals to enter the market.
Beyond price factors, the opportunity cost of holding gold has also increased. A stronger US dollar, persistently high interest rates, and market adjustments to expectations for the Federal Reserve's future rate-cut path have all constrained gold demand. Meanwhile, inflation concerns stemming from US-Iran tensions have added further uncertainty to the interest rate outlook, with some market participants believing the Fed may need to maintain a restrictive monetary policy stance for longer.
Asian Market: China Leads Outflows, India Ends Inflow Streak
Asian funds recorded their first monthly net outflow since August 2025 in May, with a total withdrawal of $1.2 billion, with the decline almost entirely attributable to the Chinese market. The report showed that weaker local gold prices in China, a strengthening Renminbi, and sustained optimism in the stock market collectively dampened demand for local gold ETFs.
The Indian market also experienced outflows, amounting to $61 million, ending a previous 12-month streak of consecutive net inflows. Notably, most of India's outflows in May occurred after the announcement of an increase in import duties, with investors taking profits as domestic gold prices rose.
European Market: Safe-Haven Demand and Falling Yields Provide Support
Europe was the only region globally to record net inflows in May, attracting $334 million, primarily driven by contributions from the United Kingdom and Germany. The positive inflows in these two markets were sufficient to offset weakness elsewhere.
In the UK, political uncertainty and market concerns over government finances supported safe-haven demand. In the latter half of the month, softer inflation data coupled with falling oil prices pushed UK government bond yields lower, reducing the opportunity cost of holding gold and further boosting local ETF demand. A similar dynamic played out in Germany, where falling oil prices eased concerns about further policy tightening by the European Central Bank, leading to lower German bund yields and supporting gold demand. In contrast, currency-hedged products, concentrated in Switzerland, saw outflows as the local currency appreciated against the US dollar.
Market Liquidity Remains Elevated
Despite the shift to negative flows, overall liquidity in the gold market remained robust. The average daily trading volume for gold markets rose slightly month-on-month in May to $424 billion and continued to exceed the full-year 2025 average, indicating that market activity did not significantly diminish despite the ETF outflows.
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