Spot gold has been on an upward trajectory since the end of 2022, rising approximately 13% last year and a further 27% year-to-date. However, an analysis of gold ETFs by Bank of America reveals that retail investors have missed out on this astonishing rally. According to Bank of America, there has been a cumulative outflow of $24 billion from gold ETFs since purchases peaked in October 2020.

Bank of America notes that for the first time since the inception of the world's largest physically backed gold ETF—SPDR Gold ETF (GLD.US)—retail investors have missed out on the gold rally. The SPDR Gold ETF manages approximately 876 metric tons of physical gold, valued at over $74 billion.

The chart above indicates that the cumulative inflow of funds into gold ETFs peaked in October 2020, a year when, under the economic impact of the COVID-19 pandemic, market participants flocked to safe-haven assets such as precious metals. However, since October 2020, outflows from gold ETFs have reached $24 billion. During this period, spot gold has risen by 39.4%. Concurrently, the SPDR Gold ETF has increased by 37.6%.

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Spot gold reached a historical high of over $2,700 per ounce at the end of September. In 2023, the uncertainty of the Federal Reserve's rate cuts and geopolitical risks bolstered gold prices. In 2024, the eventual rate cuts by the Federal Reserve further supported gold prices. Seeking Alpha analyst Dani Schijveschuurder emphasized that while the stock market (S&P 500 Index) has seen returns of around 34% over the past three years, gold has surged by approximately 50.5%.

Furthermore, according to Seeking Alpha analyst Real Investments, if the debt-to-GDP ratio exceeds 132.8%, investors should anticipate trouble for the U.S. government and thus purchase gold. Data from the U.S. Debt Clock indicates that as of the third quarter, the U.S. debt-to-GDP ratio stands at 129.6%, but it is projected to reach 133.80% by the first quarter of 2026.

Real Investments wrote last Friday: "A weaker dollar will pose a significant challenge to the U.S. government's efforts to finance its debt by selling public debt. This will lead to increased borrowing costs, reduced demand, and potential economic consequences. Needless to say, a weaker dollar will also be a strong driving force for gold prices."

World Gold Council: Gold ETF inflows have increased for the fifth consecutive month

Against this backdrop, investors seem to be catching up with the rally. According to a report by the World Gold Council (WGC) on Tuesday, global physically backed gold exchange-traded funds (ETFs) saw inflows for the fifth consecutive month in September, primarily due to funds listed in North America increasing their holdings. Gold ETFs, which store physical gold for investors, are one of the significant factors driving investment demand for precious metals.

In September, inflows into gold ETFs reached 18.4 metric tons, equivalent to approximately $1.4 billion, bringing the total holdings of global gold ETFs to 3,200 metric tons. The WGC's research report points out that the rise in gold prices and recent inflows have driven the total value of assets under management to a monthly peak of $270.9 billion at the end of September.

The WGC also estimates that global gold trading volumes increased by 7% month-on-month in September, reaching $259 billion per day, while the average daily trading volume in the over-the-counter (OTC) market increased by 10%, reaching $176 billion.With the gold price rising by 28% this year and the expectation of future interest rate cuts in the United States intensifying, speculators' net long positions in COMEX increased by 6% at the end of September, reaching 976 metric tons, the highest level since February 2020.