Rising bond yields drive outflows from gold ETFs, but long-term support remains

(Kitco News) - Rising bond yields continue to take their toll on the precious metals markets as investors flee from gold-backed exchange-traded funds (ETFs), according to the latest data from the World Gold Council.

Wednesday, the WGC said that global physically-backed gold ETFs saw their third consecutive month of outflows, declining by 46 tonnes, valued at $209 billion. So far this year, global ETFs have seen net outflows of 130 tonnes.

"During the month, the gold price declined by 1%, the weakest performance since February. And its weakness, especially during the first three weeks, was likely the main driver of the outflows in August," the analysts said in the report.

While Europe has been the biggest source of outflows in the gold market, last month was led by North American-listed funds. The WGC said that 44 tonnes of gold, valued at $2.7 billion, flows out of North American markets.

"As the US economy continues to defy recession expectations, with resilience in household consumption, the 10-year Treasury yield rose further. Fed Chair Powell's remarks at Jackson Hole further firmed investors' belief that rates are going to stay higher for longer, reducing gold's allure as the opportunity cost climbs," the analysts said in the report. "In addition, asset managers' net long positioning in 10-year Treasury futures rose to their multi-decade highs on bets of rates peaking and the most attractive yield in 16 years, diverting some attention away from gold."