FX.co ★ Gold prices end July higher despite ETF outflows, August outlook looks muted

While bond yields and the U.S. dollar remain high, the gold market cannot grow. Yet it continues to struggle, witnessing further liquidation of exchange-traded products backed by gold. In a report published by the World Gold Council on Tuesday, analysts stated that global ETF assets decreased by 34 tonnes, amounting to $2.3 billion. This marks the fourth consecutive month of liquidation in the gold market.

The report noted that on a yearly basis, gold flows as of the end of July amounted to a negative $4.9 billion USD. This means that the total reduction in reserves occurred by 84 tonnes. However, due to stable prices, assets increased by 2%, reaching $215 billion.

If we look at regions individually, European-listed funds were somewhat weaker compared to the North American markets. According to the report, Europe saw an outflow of 18.5 tonnes of gold worth $1.31 million.

Also, the report suggests that monetary policies of central banks, from the Federal Reserve and European central banks, continue to dominate gold's investment demand. Yet, it is believed that the Fed is nearing the end of its tightening cycle, which provides some support to gold.

Asian funds received a regional inflow of 2 tonnes, amounting to $132 million.

According to the WGC, despite disappointing investor interest, gold prices managed to end the month with a 3.1% increase, marking a rise to the break-even level, which indicates that inflationary issues persist. It corroborates the practical theory that data on growth was stronger, while inflation data was weaker. Nevertheless, the rise to the break-even level resulted from higher nominal yields, not real yields. This suggests that the bond market views "good" data as merely inflationary, not growth-stimulating.

Furthermore, according to analysts from the World Gold Council, even if the movement of precious metal prices remains volatile throughout August, the ongoing market uncertainty should continue to support prices.