During the week of April 20-24, the SPDR Gold Trust (GLD), the world's largest gold ETF, recorded net sales of 14.19 tonnes of gold, marking the largest outflow in years. The move came as global financial markets experienced volatile conditions.
Reasons behind the outflow
Trading data show a steady decline throughout the week with no sessions of net buying. The peak was on April 22, when 4.57 tonnes were sold in a single session. In the prior week, April 17, the fund posted a record inflow of 7.7 tonnes, underscoring how quickly and unpredictably markets were moving.
This sharp reversal is not an isolated event but part of a broader trend. In March, investors pulled more than $20 billion from the world's largest gold funds, marking gold's worst month in 17 years.
The core driver behind the outflow is a double shock in the global market. First, tensions in the Hormuz Strait pushed crude oil above $100 per barrel, triggering inflation fears as U.S. gasoline prices rose above $4 per gallon.
Second, and more importantly, the Federal Reserve had to pivot. Before the crisis, markets expected the Fed to cut rates to support the economy. However, inflation pressures from higher oil prices led the Fed to tilt toward tightening, including potential rate increases to curb inflation.
Gold is a non-yielding asset. In a high-rate environment, holding gold becomes less attractive than allocating funds to U.S. Treasuries to earn yields. As a result, investment funds and central banks sold gold to hold a stronger dollar.
Domino effect in the derivatives market
Another important factor behind the sell-off is ETF liquidity. Unlike physical bullion, ETF shares trade readily like ordinary stocks. When U.S. stocks weaken, funds often must liquidate profitable assets to meet margin calls, with gold becoming the most attractive asset to unload.
This selling triggered algorithmic trading, creating a downward spiral in
gold prices.
While Western investors were selling, Asia presented a contrasting picture. Central banks, particularly China, continued to accumulate gold, extending their buying streak to 15 consecutive months, lifting reserves to over 2,300 tonnes. Asian central banks view gold as a long-term strategic asset to hedge geopolitical risk and USD depreciation, rather than a short-term speculative instrument like Western ETFs.
Will the sell-off continue? Analysts are divided. Goldman Sachs remains optimistic and projects gold could reach $5,400 per ounce by the end of 2026, supported by central-bank demand. But Goldman also warned that if tensions with Iran escalate and energy shocks occur, gold could drop to around $3,800 per ounce before recovering.
Other analysts argue the market is entering a era of stagflation, with growth slowing while inflation remains high. Despite the near-term selling, gold is still regarded as a safe-haven asset over the long term, especially if central banks are forced to ease monetary policy in the future.
The 14-ton move does not spell the end of the gold era but a technical adjustment within a volatile cycle as markets reassess the geopolitical complexities and the uncertain monetary policy stance of major central banks.
Source: Bloomberg, SPDR Gold Trust, World Gold Council, Goldman Sachs.
