Gold Holds Firm Despite Weaker ETF Flows and Speculative Demand, Says ING Analyst

Despite slowing inflows into gold-backed exchange-traded funds (ETFs) and declining net long positions in the futures market, gold continues to hold its ground, supported by central bank purchases and safe-haven demand, according to Ewa Manthey, commodities strategist at ING.

In her monthly report, Manthey noted that gold’s rally stalled after hitting record highs above $3,500 per ounce in April. Still, prices remain up nearly 28% year-to-date, driven by global trade tensions, geopolitical risks, and ongoing central bank buying.

She explained that ETF inflows played a significant role in boosting prices during the first half of the year — the strongest half-year performance since 2020. However, in recent weeks, these inflows have started to wane, indicating a relative cooling in investor appetite, she said.

While speculative net long positions in futures contracts have declined, central banks have maintained a steady pace of gold purchases since the beginning of the year. According to World Gold Council data, central banks added approximately 20 tonnes to global reserves in May, compared to the 12-month average of 27 tonnes per month.

Kazakhstan's central bank led the buying with 7 tonnes, followed by Turkey and Poland with 6 tonnes each, while Singapore’s Monetary Authority sold about 5 tonnes during the same period.

In June, China extended its buying streak for the eighth consecutive month, as the People’s Bank of China added 70,000 troy ounces, bringing total purchases since November to 1.1 million ounces — approximately 34.2 tonnes.

Manthey emphasized that persistent economic uncertainty and central banks’ desire to diversify away from the U.S. dollar will likely fuel further gold accumulation in 2025. She cited the latest World Gold Council survey, which revealed:

43% of central banks expect to increase their gold reserves.

95% believe global official reserves will continue rising over the next 12 months.

These expectations are largely grounded in gold’s role as a hedge against crises and inflation.

ING also reported that central banks collectively purchased 1,045 tonnes of gold in 2024, representing roughly 20% of total global demand. Poland, India, and Turkey were among the largest buyers.

Gold Price Movement: Narrow Range, Strong Support

On the spot market, gold reached a session high of $3,365 per ounce but failed for the third time to break above that level. Prices retreated to $3,320 by midday and later stabilized at $3,329.53, marking a daily decline of 0.53%.

While gold continues to trade within a narrow range, Manthey believes the bullish fundamentals remain intact but require a fresh catalyst.

“Trade tensions are ongoing, especially after U.S. President Trump threatened to impose 30% tariffs on the European Union starting August 1 if no new deal is reached. With rising geopolitical risks, it may not take much to spark a new upward wave,” she noted.

However, Manthey warned that persistently high gold prices could suppress consumer demand, limiting further upside potential in the short term.