Gold ETFs suffer their largest outflows in 4 years as higher interest rates hurt investment demand

Gold ETFs suffer their largest outflows in 4 years as higher interest rates hurt investment demand

Gold-backed exchange-traded funds in the first quarter of 2021 logged the largest outflows in more than four years, sapped by rising interest rates, but jewelry sales helped offset pressure on global golddemand, according to the World Gold Council.

Outflows from gold ETFs totaled 177.9 tonnes, or $9.5 billion, driven by Western markets as US interest rates spiked and the US dollar rose, the organization said Thursday. The performance sharply lagged inflows of 299.1 tonnes during the same quarter last year.

The outflows contributed to a 23% fall in global gold demand from a year earlier, to 815.7 tonnes.

"Outflows quickly mounted through the quarter as inflationary expectations -- and, by extension, expectations of higher interest rates -- were unleashed," said the council in a statement. "Outflows of this magnitude were last witnessed in Q4 2016, a time when there was a similar re-appraisal of the expected course of US growth and interest rates."

The acceleration of the US economy's recovery from the COVID-19 pandemic has prompted economists to raise their growth and inflation forecasts and investors during this year have sold off Treasury bonds as they anticipate a pickup in consumer price inflation beyond the Federal Reserve's target of 2%.

The bond selloff lifted long-dated