Gold prices were largely flat in July, but gold ETFs saw renewed inflows, led by European funds. More notably, this inflow occurred as German real bond yields rose to a 15-year high.
Historically, European investors typically reduce their gold holdings when real interest rates are positive, as the opportunity cost of non-interest-bearing gold increases. This current activity breaks with past patterns, potentially indicating that European funds are reassessing the value of gold, or it could be related to regional stock rotation or the attractive valuations following a significant gold price decline.
However, the World Gold Council has not confirmed the specific reasons for the inflows, and a single month's change is insufficient to prove a long-term trend has formed. The next step is to observe whether European ETF inflows can continue and whether they continue to disregard rising real interest rates.
