Gold's Bull Run: How Rising ETF Flows Could Fuel More Growth

Gold has been on a seemingly unstoppable surge since the summer of 2022. But the recent bull run has been missing an ingredient common to the previous price rises this millennium—positive ETP flows.

As the chart below shows, prior to the relationship breaking down in 2023, the gold price—in US dollars—and gold exchange-traded product (ETP) flows had moved in the same direction in 19 out of the last 20 years (ROW = rest of world).

Sources: World Gold Council. ETF Stream calculations.

This is intuitive, given gold ETPs comprise a significant part of overall demand for gold—jewelry and central banks are other important demand sources—so investor flows can have a significant price impact on the precious metal.

Ben Seager-Scott, CIO at Mazars, said: “Aggregate flows are especially important for gold because, frankly, it does not have much else to base an analysis on, lacking any underlying cashflow or economic fundamentals.

“You are just left with trying to forecast how buyers and sellers are feeling and what they are thinking about.”

Given elevated prices, jewelry demand is likely to be soft, steady strategic central bank buying will continue and ETF investor flows will turn meaningfully positive in 2025. In the context of relatively predictable new supply, this will be sufficient to power gold past $3,000/oz.

Central Bank Whales

When the EU, UK, Canada and U.S. agreed to impose economic sanctions on Russia in early 2022 following its invasion of Ukraine, central bank demand for gold underwent a paradigm shift.

Between 2010 and 2021 central banks were net buying an average of 481 tonnes (530 tons) per year, according to World Gold Council figures. Between 2022 and 2024 net purchases exceeded 1,000 tonnes every year.

Turkey, Poland, India and China were among the chief buyers as central banks looked to diversify their foreign exchange reserves away from the US dollar, among other currencies.

While the buying is not as quite as aggressive as it was in 2022, there is still robust demand from central banks, according to Krishan Gopaul, senior analyst, EMEA, at the World Gold Council.

“The vast majority of the buying is strategic. There may be an element of a bank’s reserves that are a little more price sensitive than the bulk, but we’ve continued to see central bank buying in spite of the increase in gold prices.

“That speaks to the environment we’re in and why these players are buying gold. They have much longer time horizons and are less concerned about shorter-term price fluctuations.”

ETF Demand Rebounds

Around the same time, global interest rates started to climb in response to runaway inflation and since gold does not pay a yield, many ETF investors favored bonds for their defensive allocations over 2022 and 2023, explained Nitesh Shah, head of commodities and macroeconomic research at WisdomTree.

Gold ETF flows turned negative in late 2022 and the selling continued into 2024. Approximately halfway through the year, however, the trajectory turned positive and inflows have continued into 2025 with February looking set to be the best month for some years. Over-the-counter (OTC) gold demand has also been strong in recent months.

While many ETF investors sat out the early stages of the rally, “growing uncertainty around trade and geopolitical risks has renewed interest in gold,” said Shah. Declining interest rates may well have increased gold’s relative appeal, too.

Seager-Scott agreed that investors were the dominant buyer at present but questioned how long that would remain the case.

Investors “are generally more price sensitive, so after gold rallying for the ‘wrong reasons’—that is, gold is often bought as a hedge against market downturns—I am happy to take profit and wait for a more attractive re-entry point,” he said. Mazars closed out its gold ETP position in Q4.

Outflows and Demand

While there will certainly be more profit taking through the year, any outflows will most likely be overwhelmed by new demand.

Lower interest rates will enhance gold’s appeal relative to bonds, a weaker dollar could also provide a tailwind, US equities valuations remain elevated and sentiment appears increasingly fragile.

The US economy is starting to demonstrate signs of meaningful weakness and gold is a popular way to express fears around geopolitical risks and uncertainty around tariff wars. Safe havens and diversifiers are likely to prove popular.

With robust central bank buying likely to offset freshly minted supply and weak jewelry demand, gold ETP flows look set to propel the precious metal to fresh highs this year.

This story was originally published in etf.com sister publication ETF Stream.