Gold fund inflows hit a record: $8.7 billion in a single week, total inflows over four months exceed the total of 14 years

Gold funds have recorded the largest weekly inflow in history, with Bank of America Global Research citing EPFR data showing that in the week ending Wednesday, gold funds attracted an inflow of $8.7 billion, pushing the total inflow over the past four months to $50 billion, surpassing the cumulative inflow of the previous 14 years.

This influx of funds occurred amid significant fluctuations in gold prices, with spot gold hitting a historic high of $4,381.21 per ounce on Monday before plummeting sharply, falling 6.3% in a single day on Tuesday, marking the largest drop since 2013. Despite the pullback, gold prices are currently reported at $4,048.43 per ounce, still up over 50% this year.

Analysts point out that the driving force behind this round of increases has shifted from stable central bank gold purchases to the fast-moving ETF funds, a structural change that is amplifying market volatility. Retail investors have flocked to ETFs backed by physical gold, becoming the main driver of soaring gold prices.

The surge in implied volatility of gold ETFs further exacerbates market concerns, as historical experience indicates that a sharp rise in this indicator typically occurs at short-term turning points and moments of trend exhaustion.

Inflow Scale Breaks Historical Record

Data from Bank of America Global Research shows that the $8.7 billion inflow into gold funds in a single week has set a new historical record.

What is even more noteworthy is the speed of the inflow: the $50 billion inflow over the past four months exceeds the total of the previous 14 years, highlighting a dramatic shift in market sentiment.

This influx of funds propelled gold prices to a record high of $4,381.21 per ounce on Monday. However, as investors took profits and momentum traders closed positions, prices subsequently fell sharply.

Structural Change in Funds Poses Volatility Risks

Analysis indicates that this round of gold price increases is fundamentally different from the market conditions at the beginning of the year. Central banks have not participated in the price increase since September, with the stable force of central bank gold purchases absent from the market.

From a trading session perspective, the significant rise in gold prices in April mainly occurred during Asian trading hours, while this round of increases has primarily taken place during European and American trading hours, with Asian hours mainly following the trend. This phenomenon further confirms that central banks have not intervened in this round of price movements.

More concerning is that this round of increases has been accompanied by a substantial expansion of ETF sizes, which also contrasts sharply with trading conditions at the beginning of the year. ETF funds are typically characterized by fast in-and-out trading, and the trends they dominate often exhibit high volatility. Retail investors gaining exposure to gold through ETFs has become a popular method, but the speculative nature of such funds also introduces instability into the market.

The 6.3% single-day drop on Tuesday reflects market concerns over the previous rapid and aggressive price increases. Nevertheless, gold prices have still risen over 50% this year, demonstrating strong upward momentum. The key question facing investors is how long this upward trend can continue in a market structure dominated by fast money from ETFs and absent central bank participation