World Gold Council: Gold Fluctuations Do Not Alter the Strong Momentum of Investment Demand

Source: Jintiao Data

According to the World Gold Council, despite recent disappointing gold price movements and the metal’s failure to hold safe-haven buying, it continues to attract strong investor interest due to broader geopolitical tensions and changing macroeconomic conditions.

Based on the latest ETF flow report released by the World Gold Council last week, in February, global physical gold ETFs saw a net inflow of $5.3 billion, marking the ninth consecutive month of net inflows and the strongest start on record. Global holdings increased by 26 tons to 4,171 tons, while rising gold prices boosted asset management scale to a record $701 billion.

Most demand still comes from North America, which contributed $4.7 billion in inflows in February, continuing a nine-month streak of investment demand. The World Gold Council noted that historically, such sustained inflows often occur during periods of heightened systemic risk, such as during the global financial crisis and the COVID-19 pandemic.

Investor demand in other regions also remains resilient. Asian gold ETFs recorded $2.3 billion in inflows in February, continuing six months of positive demand, mainly driven by Japanese investors amid political uncertainty, a weak yen, and strong local currency gold prices.

Europe was the only region to experience fund outflows, with $1.8 billion, mainly due to redemptions following gold selling at the end of January. However, inflows later in the month indicated that the outflows did not represent a long-term shift in investor sentiment.

Joe Cavatoni, senior market strategist at the World Gold Council, told Kitco News that geopolitical tensions remain a key driver of investor focus on gold. However, he added that while geopolitical shocks can trigger sharp rebounds, gold’s long-term performance ultimately depends on fundamentals rather than short-term market reactions.

“There will be upward movement, but once the market sees the results of systemic events, these gains will be better understood,” he said. “In such cases, conditions will revert to sustained gold price growth because we are not ignoring the fundamentals still driving this asset.”

Despite gold prices failing to stabilize at the start of the new month, Cavatoni said it’s hard to understand why the long-term uptrend would end in a world full of uncertainty. He added that investors need to recognize that while prices will fluctuate at these levels, this remains a healthy market function. He explained that higher volatility reflects increasing investor engagement with the metal.

He said, “I look at volatility from three perspectives. First is the growing interest and adoption of gold as an investment. When you see this acceptance accelerate, you naturally see higher volatility alongside stronger price performance. We expect this to continue. So, this growth trajectory raises overall volatility levels. Then there’s momentum, which I categorize as prosperity—traders call it FOMO (Fear of Missing Out).”

At the time of his comments, the annualized volatility in the gold market had risen to about 25-30%, compared to a long-term industry expectation of around 15%. However, Cavatoni pointed out that gold price fluctuations are increasingly aligning with other asset classes.

He said, “We are actually moving in sync with other risk assets. Capital flows are faster than ever, and market participants involved in gold and silver are at their highest levels ever.”

He added that gold provides important liquidity within broader portfolios, helping investors navigate widespread market uncertainty.

However, Cavatoni also noted that not all volatility is beneficial. Structural disruptions in the financial system—such as transportation bottlenecks, tariffs, or market infrastructure issues—could introduce more unpredictable market instability.

“This is the kind of volatility I worry about,” he said. “Moments that are completely unpredictable, making markets harder to prepare for.”

Despite cyclical turbulence, the ongoing ETF inflows indicate that, amid rising geopolitical uncertainty and evolving macroeconomic landscapes, investors continue to see gold as a key strategic asset.

Cavatoni stated that even in volatile environments, he expects gold to remain an important diversification tool, as it is no longer solely driven by interest rate fundamentals.

Although central bank gold purchases have slowed from their peak over the past three years, he said official sector demand will still be a stable force, creating long-term value for gold.