Physically backed gold ETFs gained $38 billion in the first half of 2025, according to the World Gold Council. This marks the largest semi-annual increase since 2020. The surge is due to a growing demand for safe assets amid geopolitical and economic fears, particularly from a trade war driven by tariffs. ETF holdings rose by 397.1 metric tons, totaling 3,615.9 tons by the end of June. However, this amount is still below the October 2020 high of 3,915 tons. US-listed ETFs contributed 206.8 tons, while Asian-listed funds made up 28% of total global inflows, even though they account for only 9% of global assets under management (AUM). This growth is in stark contrast to the modest inflows of 2024 and years of outflows due to rising interest rates. Spot gold prices jumped 26% this year, reaching a record $3,500 per ounce in April. The World Gold Council, based in London and supported by major gold mining companies, seeks to boost gold demand and accessibility. It helps shape global views on gold by providing data on trends, investment flows, and central bank purchases. While it appears neutral, its primary goal is to promote gold, especially during economic or geopolitical challenges. In simpler terms, the rise in gold ETF inflows shows a clear shift among asset managers who are responding to a renewed desire for safety. These impressive numbers indicate a significant movement of capital into gold, an asset that many trust during uncertain times. When we look at the nearly 400 metric tons added to holdings in six months, it’s a clear reaction to changing economic fears. While total holdings haven’t returned to their peak from late 2020, the momentum this year is unmistakable compared to the more subdued activity in recent years. Geographically, Asian-listed funds stand out. They captured over a quarter of the inflows, despite holding less than 10% of global assets under management. This suggests a rapidly building institutional interest in that region, with purposeful capital movement. On the other hand, US-listed products are bringing in the most tonnage, emphasizing their role as the primary choice for larger transactions. The connection between US inflows and gold price movement isn’t merely coincidence; the 26% increase in spot gold signals that investors expect further short-term volatility. This shift is not only a return to gold but also a broader recalibration of risk appetite. As central banks show patience on interest rates and trade tensions continue, many institutions are rethinking their reliance on traditionally safe assets like government bonds. For teams managing short-dated exposure, staying in tune with ETF subscription data and forward price action will be crucial. Ongoing inflows into gold funds, even as yields remain flat, create short-term discrepancies in futures premiums. This situation makes tactical positioning more valuable than passive holding. It’s important to recognize that the data on these flows comes from a group with a clear agenda. Thus, while trends are evident, it’s essential to keep in mind that support for gold is both analytical and structural. In our analysis, we’ve started adjusting our positions, particularly where ETF holdings impact options skew or lead spot prices in the Comex futures curve. We don’t foresee sudden shifts, but strong demand from funds can distort short-term volatility expectations. All these movements stem from a simple fact: investors are reluctant to hold cash that yields less than inflation, and there’s uncertainty about the stability of other typical safe havens. Whether driven by policy or news, this reaction leads to one outcome: an increased demand for gold. Positioning in derivatives has shifted from conviction-based strategies to anticipating others’ late hedging. Timing of entry now holds more weight than macro alignment, at least in the next month or two. Live gamma exposure, especially during gold ETF rebalancing periods, can create both opportunities and risks. These periods have already seen increased order book activity as funds adjust their hedging strategies, and we’re closely monitoring these trends for potential opportunities. Recently, signals have emerged from higher options volumes linked to rollover hedges. This suggests that nimble investors see price support levels as stable, even without significant price rallies. However, tail risk is still a possibility. Traders need to adapt to changing conditions instead of assuming stability. Let’s continue to stay alert.

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