Gold's Three-Year Bull Run Ends as ETF Funds See Nearly $18 Billion in Net Outflows
Claire Weston
Gold has entered a bear market after hitting a record near $5,600/oz in January, with ETF outflows approaching $18 billion; long liquidation — not short-selling — drove the decline, and selling pressure may not be over.
Gold is down sharply — who is selling?
Gold fell from its January peak near $5,600/oz and broke below $4,000 multiple times last month, officially entering bear-market territory.
The key point: short-sellers did not drive this decline. It was concentrated unwinding by investors who had been long.
Bart Melek, head of commodity strategy at TD Securities, noted that short positions among money managers on the New York futures market remain near historic lows. "There aren't a lot of shorts out there — there's still a lot of long positioning that can be reduced."
This means → if the dollar keeps strengthening and rates stay elevated, speculative funds such as quant strategies still have significant room to go short, creating a potential second leg down.
Why did ETF investors start redeeming so aggressively?
After the Iran war broke out, oil prices surged and markets began pricing in rate hikes to combat inflation.
In plain terms = higher rates make bonds and other yield-bearing assets more attractive, while gold pays no interest — the opportunity cost of holding gold rises, so ETF investors accelerate redemptions.
JPMorgan analysts called ETF investors the "marginal pricing force" in the gold market — meaning the last push on price, up or down, is now determined by this group.
The bank slashed its forecast for global gold-ETF flows this year from roughly 400 tonnes of net inflows to roughly 50 tonnes of net outflows.
Central banks are still buying gold — why hasn't that supported prices?
Although central banks in Turkey, Russia, and Azerbaijan briefly sold gold early in the Iran war — sparking fears of collective dumping — the latest data show central banks overall accelerated purchases in Q1 this year.
The People's Bank of China stands out: it has added gold for 20 consecutive months, with the pace disclosed in June the fastest since 2023.
Chris Louney, commodity strategist at RBC, said: "Central banks' thinking on gold reserves is broadly aligned — if you want to de-dollarize and diversify, gold's role as a long-term reserve asset is irreplaceable."
This reflects a structural mismatch: central-bank buying is "slow money" — steady but not large enough to offset massive short-term ETF redemptions. Gold prices remain driven by ETF flows in the near term.
What comes next — is the selling over?
JPMorgan analyst Greg Shearer's team concluded that "the macro and rate environment will continue to weigh on gold prices in coming quarters," though the bank maintains a long-term bullish stance.
The central question now: has long liquidation nearly run its course, or is a larger wave of selling still ahead?
This means → two signals will determine whether gold can stabilize: first, whether short positions start rising meaningfully (moving from the margin to the driver's seat), and second, whether the Fed shifts its stance on rates. Until then, any rally has limited fuel.
Content is for reference only, not financial advice.