The lower the gold price falls, the more European and American investors buy gold ETFs.

Jia Shuchang, Head of Research for Asia Pacific at the World Gold Council, told The Economic Observer that the sudden rush of European and American investors into Gold ETFs amid falling gold prices is indeed somewhat "abnormal". After all, at a time when high energy prices are prompting European and American central banks to tighten monetary policy, the rise in real interest rates in Europe and the United States is not conducive to the increase of gold prices.

Since October, Wang Lixin, CEO of the World Gold Council China, has received many inquiries from friends in Europe and the United States: Should they buy Gold ETFs (Exchange Traded Funds)?

This made Wang Lixin curious: European and American investors have long adopted the investment strategy of "chasing the rally and selling the dip" for Gold ETFs — buying when gold prices rise and selling when gold prices fall. Now, in the face of gold price correction, have they started to "invest in the opposite direction"?

On November 3, the World Gold Council released its *Global Gold Demand Trends Q3 2026* report, showing that the net capital inflow into global Gold ETFs in that quarter reached 31 billion U.S. dollars, hitting a new all-time quarterly high. Affected by this, the gold holdings of Gold ETFs in the third quarter increased by 211 tons quarter-on-quarter, pushing the total Gold ETF holdings to 4,256 tons and setting a new record.

Among them, European and American investors have become key drivers. In the third quarter, the net capital inflows of investors in Europe, the United Kingdom and the United States reached approximately 13.5 billion U.S. dollars, 7.7 billion U.S. dollars and 7.3 billion U.S. dollars respectively.

Jia Shuchang, Head of Research for Asia Pacific at the World Gold Council, told The Economic Observer that the sudden rush of European and American investors into Gold ETFs amid falling gold prices is indeed somewhat "abnormal". After all, at a time when high energy prices are prompting European and American central banks to tighten monetary policy, the rise in real interest rates in Europe and the United States is not conducive to the increase of gold prices.

"Our monitoring data shows that during the continued gold price correction in October, European and American investors remained major buyers of global Gold ETFs," said Jia Shuchang. Throughout October, global Gold ETFs recorded a net capital inflow of 2.7 billion U.S. dollars, of which European investors made a net purchase of 1.8 billion U.S. dollars.

Buying More as Prices Fall

Zhou Feng works at a U.S. securities institution and has more than 5 years of working experience in Gold ETF brokerage business.

In his impression, European and American investors used to be keen on chasing the rally and selling the dip in gold investment.

"Many European and American customers said bluntly that Gold ETFs are trading tools for profiting from betting on gold price fluctuations. Gold assets do not generate interest, so there is no need to take Gold ETFs as long-term underlying assets to hold," Zhou Feng said.

Since the third quarter, Zhou Feng has felt that this situation has changed. In the third quarter, more than 30 European and American investment institutions served by Zhou Feng raised the allocation proportion of Gold ETFs in their investment portfolios from 0 to 5%. In October, this proportion further increased by more than 2 percentage points.

Since September, when the international spot gold price fell back from 4,700 U.S. dollars per ounce to 4,100 U.S. dollars per ounce, European and American investors not only did not reduce their positions to stop losses, but also bought more as prices fell.

Zhou Feng once suggested that European and American investment institutions stop losses and exit the market in time, but they replied that this time they would not bet on gold price fluctuations for profits, but planned to hold the positions for a relatively long time.

Many European and American investment institutions told Zhou Feng that driven by rising expectations of interest rate hikes by European and American central banks that push up real interest rates, they do not expect gold prices to rise significantly in the coming period. But at present, they do have an urgent need to over-allocate Gold ETFs.

Jia Shuchang told reporters that the rush of European and American investors into Gold ETFs started in August. In that month, the global gold price rebounded from 4,100 U.S. dollars per ounce to 4,700 U.S. dollars per ounce, attracting European and American investors to invest more than 15 billion U.S. dollars in Gold ETFs. However, since September, the gold price has quickly erased all gains in August. Instead of following the past practice of "reducing positions when gold prices fall", European and American investors continued to make net purchases of more than 8 billion U.S. dollars of Gold ETFs from September to October.

Hedge Against Potential Risks

Since October, many heads of asset allocation departments of European and American asset management institutions have told Zhou Feng that they urgently need a new type of asset to hedge the current risk of increased price volatility of European and American stocks and bonds.

The head of the asset allocation department at a U.S. family office told Zhou Feng that Wall Street investment institutions have long followed the "60/40" asset allocation strategy, that is, allocating 60% of funds to the stock market and 40% to the bond market, so as to hedge the price fluctuation risk between stocks and bonds. If the stock market fluctuates sharply, the 40% proportion of bond investment can act as a "cushion" to stabilize the net value fluctuation of the entire investment portfolio.

Since the third quarter, the price volatility of both stocks and bonds in Europe and the United States has increased. Among them, the expectation of the Federal Reserve's monetary policy tightening and large AI (Artificial Intelligence) enterprises competing to issue bonds to raise funds have led to a rapid rise in U.S. and European government bond yields; the resurgence of the geopolitical conflict between the United States and Iran and high energy prices have caused European and American stock markets to jump up and down, with a larger fluctuation range than before.

This has made many European and American investment institutions realize that the seemingly "safe" "60/40" asset allocation strategy not only cannot achieve the risk hedging effect, but also faces new investment risks — once the prices of stocks and bonds fall simultaneously, the net value of the entire investment portfolio will be dragged down to retreat beyond expectations.

As a result, gold, which has experienced a sharp price correction, has quickly become a new safe-haven allocation choice in the eyes of European and American investment institutions.

Zhou Feng said that European and American investment institutions choose to continue increasing their positions in Gold ETFs because they believe that after gold prices fell from the all-time high of 5,598 U.S. dollars per ounce at the beginning of the year to around 4,100 U.S. dollars per ounce, there is limited room for further decline, and it already has a high "cushion" effect.

By analyzing the composition of capital inflows of mainstream Gold ETF products in Europe and the United States, Jia Shuchang found that more than 50% of the funds came from local investment institutions.

"There are many factors affecting European and American investment institutions' purchase of Gold ETFs, including interest rates, gold prices, capital liquidity, the strength of the local stock market, etc. Since the third quarter, a new variable has attracted their high attention: the term premium of long-term government bonds in Europe and the United States has risen sharply, triggering market concerns about the high debt scale and debt sustainability of European and American countries," Jia Shuchang said.

The head of the asset allocation department of a large European asset management institution revealed to reporters that since the third quarter, it has kept the allocation proportion of Gold ETFs steadily at 6%.

"In the coming period, if the financial market's concerns about the huge debt scale and debt sustainability of European and American countries intensify, we will increase the Gold ETF allocation proportion by at least 3 percentage points before the end of the year," said the aforementioned head of the asset allocation department. The investment committee particularly values the feature that gold does not have sovereign credit debt default risks, and it can have a stronger asset preservation effect when debt repayment disputes break out in European and American countries.

This article is from the WeChat Official Account "The Economic Observer", written by Chen Zhi, and authorized for release by 36Kr.