Geopolitical uncertainty and the growing threat of inflation provided solid support to gold ETFs. This is despite the aggressive monetary policy of the Federal Reserve.
On Wednesday, the World Gold Council (WGC) said gold-backed ETFs gained 187.3 tons, the strongest since February 2016. It increased even though stocks were rallying and there was a strong performance in the US dollar.
Most of the inflow came from North America and Europe.
And during the first quarter, March accounted for nearly 70% of the 269 tons of gold flowing into the ETF. As such, in the first three months of 2022, gold prices rose by 8%, the best quarterly figure since the second quarter of 2020.
This shows that gold is a reliable source of diversification and preservation of wealth, even at a time when there is economic uncertainty and increased volatility.
In fact, the metal is now trading above $1,900 despite the 0.5 bp rate increase by the US Fed.
As said earlier, the monthly inflow of gold ETFs in March shows that investors view gold as a proven and effective hedging tool. Reportedly, funds registered in North America increased their gold reserves by 100.6 tons, while European funds increased by 82.7 tons. Funds in Asia, on the other hand, ramped up their inflow by 2.6 tons, the first time in history. But on a yearly basis, inventories decreased by 10.5%.