Despite a price development recently perceived by many as disappointing, gold remains a magnet for investors, according to the World Gold Council. Although the precious metal has not been able to sustain a classic “safe-haven bid” recently, geopolitical tensions and changing macroeconomic conditions continue to generate sustained interest.
This is particularly evident, according to the industry association’s latest ETF Flows Report, in the inflows into physically backed gold ETFs: February brought a strong boost and extended a series that has been ongoing for months.
According to the World Gold Council, global physically backed gold ETFs recorded net inflows of $5.3 billion in February. This marks the ninth consecutive month of positive net inflows – and also the strongest start to the year since data collection began. Global holdings increased by 26 tonnes to 4,171 tonnes. In parallel, higher gold prices drove assets under management (AUM) to a new record of $701 billion.
Gold ETFs: North America Dominates, Asia Catches Up – Europe Initially Weaker
Regionally, the majority of inflows came from North America. There, $4.7 billion flowed into physically backed gold ETFs in February. This continued a nine-month period of net inflows in this region. The World Gold Council historically classifies such sustained demand as typical for periods of “increased systemic risk” – and refers in this context to comparable periods such as the Global Financial Crisis and the COVID-19 pandemic.
Asia also remained on the buying side: Gold ETFs there recorded $2.3 billion in inflows in February, extending a six-month streak of positive demand. The report specifically names Japan as a driver, where political uncertainty, a weaker yen, and strong gold price performance in local currency played a role.
Europe, however, was the only region with net outflows. Funds here recorded redemptions of $1.8 billion in February. The World Gold Council attributes this primarily to outflows at the beginning of the month, which began after a precious metal sell-off at the end of January. However, flows turned positive again later in the month, which the report interprets as an indication that it may not necessarily be a longer-term shift in investor sentiment.
World Gold Council: Geopolitics as an Impetus, Fundamentals as a Guardrail
In an interview with Kitco News, a Senior Strategist at the World Gold Council highlighted the role of geopolitical tensions as a key driver behind the sustained interest in gold. At the same time, he draws a clear distinction: while geopolitical shocks can trigger strong short-term rallies, the longer-term development of gold depends more on fundamental factors than on the immediate market reaction to individual events.
The strategist describes the logic as follows: price gains after systemic events are better understood once the market can grasp their outcome and impact. In the current situation, in his view, the fundamentals continue to suggest that the longer-term trend will not simply end – even if the start of the new month was initially weaker. A central argument: in an environment full of uncertainty, it is difficult to understand why the long-term upward trend should abruptly cease precisely now.
Volatility Rises to 25–30% – More Market Participants, Faster Capital Flows
A key focus of the assessment concerns volatility. The World Gold Council observes that annualized volatility in the gold market has recently risen to around 25–30%. This is significantly above a long-established market expectation of approximately 15%. The World Gold Council strategist views this increase not only as a risk but also as an expression of growing market participation: higher volatility can indicate that more investors are using gold as an asset class and that capital movements have become faster.
He categorizes volatility into three types. First, it represents increasing acceptance and use of gold as an investment – if the pace of adoption increases, higher volatility alongside better price performance is not unusual. Second, there are momentum effects, which he describes as a kind of “exuberance” – traders often use the term FOMO (Fear of Missing Out) for this. Third, he emphasizes that the price fluctuations of the yellow metal are now moving more in sync with other asset classes: gold is increasingly “tracking” like other risk assets because more market participants are active and money is being reallocated faster – specifically into gold and silver.
At the same time, he makes an important qualification: not every type of volatility is desirable. Structural disruptions in the financial system – such as transport bottlenecks, tariffs, or problems in market infrastructure – could create a more difficult-to-calculate instability. This is the form of volatility he classifies as particularly problematic because it is “radically unpredictable” and harder for markets to prepare for.
Strategic Role: ETF Inflows as a Signal – Central Banks Remain Stabilizing
Despite short-term turbulence, the World Gold Council sees a clear signal in the series of ETF inflows: investors continue to view gold as a strategic asset in an environment of increasing geopolitical uncertainty and changing macro conditions. The strategist expects gold to remain an important diversifier even in a volatile market environment – not least because, in his estimation, gold is now more than a one-dimensional asset that can be explained solely by interest rate and real interest rate mechanics.
Additionally, he refers to the “official sector”: although central bank gold purchases have decreased compared to the very high peaks of the past three years, central bank demand should continue to act as a stabilizing force and support value in the long term.
Ultimately, the World Gold Council combines two observations that appear contradictory at first glance: on the one hand, gold does not always succeed in translating geopolitical impulses into sustainably higher prices in the short term. On the other hand, record inflows into physically backed gold ETFs, rising global holdings, and a record volume of assets under management indicate that strategic demand remains high – and that more investors than before are willing to actively deploy gold in portfolios despite increased volatility.
