Global funds get rid of gold.. What happens to the precious metal?

Recent data revealed that last June witnessed the exit of investments from gold-backed investment funds at a value of $3.7 billion, equivalent to about 56 tons of gold at the level of gold-traded funds globally, which led to the withdrawal of investments during the first half of 2023 at a value of $2.7 billion. Equivalent to 50 tons of gold.

The monthly report of the World Gold Council indicated that the most prominent investments coming out of the funds were in Europe and North America, which collectively lost $3.5 billion, worth 53 tons of gold, during the month of June.

While the increase in outflows is linked to the decline in the price of the precious metal during the second half of last month, amid tightening by the main central banks in the face of inflationary pressures.

The outflow of investment from gold funds during the month of June caused the global demand for gold ETFs to shift during the first half of 2023 to a negative level of 50 tons, which is equivalent to a cash outflow of $2.7 billion.

At the same time, trading activities in the global gold market declined in June, averaging about $152 billion per day, down by 13% from last May. Investors’ tendency to trade gold was affected by the continued decline in its prices, with central banks continuing to tighten monetary policies and raising interest rates. While the non-physical trading market remained relatively stable with a moderate decline of 1% on a monthly basis.

Yesterday, gold prices rose sharply at the settlement of transactions, with the dollar index falling to its lowest level in more than a year, following the issuance of data that reflected slowing inflation in the United States, which reduces the need for the Federal Reserve to tighten long-term monetary policy.

The yield on two-year US Treasury bonds fell by nearly 12 basis points to 4.750%, and the yield on 10-year debt fell by 11 basis points to 3.861%.

Upon settlement, gold futures contracts for August delivery increased by 1.25%, or $24.6, to reach $1,961.7 an ounce.

While the dollar index, which measures the performance of the US currency against a basket of six major currencies, fell by 1.1% at 100.61 points, after touching during trading the level of 100.55 points.

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