Gold ETF outflows accelerated in 2026 after the rate-cut narrative that pushed gold to $5,595 in January reversed. The Federal Reserve adopted a more hawkish stance as Iran-related oil price pressure rekindled inflation concerns. Standard Chartered analyst Suki Cooper noted that roughly 298 tonnes of gold held within ETFs are now underwater — a meaningful structural ceiling on any near-term rally.
As of Thursday, June 25, 2026, gold traded near $4,009 an ounce, recovering somewhat after breaking below $4,000 the previous day for the first time since November 2025. Silver was around $58.03. Both metals have declined roughly 29% from their January peaks as the Fed’s hawkish shift under Chair Kevin Warsh altered investor expectations. The U.S. dollar is at a 13-month high, and CME FedWatch implied odds of a September rate hike rose to about 68%, up from 29% a week earlier.
The paper market tells one clear story: ETF investors bought gold on hopes for rate cuts, those hopes faded, and many now seek to exit positions. Yet below the surface, another cohort of buyers has remained steady.
What’s happening in the ETF market right now?
Gold-backed exchange-traded funds registered net outflows of about 16 metric tonnes in May 2026 and continued to bleed into early June. Last week a reversal occurred: a $1.1 billion inflow broke four consecutive weeks of redemptions, according to World Gold Council ETF flow data published in June 2026. While that inflow was encouraging, the overhang of underwater ETF positions remains.
Standard Chartered’s June 24 research highlighted that roughly 298 tonnes of ETF-held gold sits below investors’ purchase prices at current levels near $4,000. That number rose from about 270 tonnes when gold traded above $4,250. These holders are often short-term oriented traders rather than long-term strategic buyers. As prices move back toward their entry points, each incremental recovery increases the risk of selling, creating a structural cap on short-term rallies rather than a guaranteed support level.
This dynamic matters because ETF redemptions convert financial positions into physical supply. When investors redeem ETF shares, authorized participants return metal to the market. A sustained wave of redemptions therefore becomes a genuine supply event rather than merely a portfolio reshuffle. At today’s prices, the approximate 298-tonne figure represents a substantial dollar value of metal likely to face selling pressure if holders try to break even.
Who is buying on the other side?
Here the markets diverge. The World Gold Council’s 2026 Central Bank Gold Reserves Survey, published June 16, found that 89% of reserve managers expect global central bank gold holdings to rise over the next 12 months. A record 45% of the 76 central banks surveyed planned to add to reserves — the highest participation in the survey’s nine-year history.
Crucially, central banks are not rate-sensitive traders; they lack stop-loss constraints and operate on multi-year mandates. A central bank with a target allocation to gold has a clear incentive to buy more when prices fall, since lower prices make it cheaper to reach strategic reserve targets. In short, ETF traders and sovereign reserve managers operate on different time horizons and with different objectives.
World Gold Council data for Q1 2026 showed central banks bought a net 244 tonnes of gold in that quarter, exceeding both the prior quarter and the five-year average. Notable purchases included Poland adding 14 tonnes in April, China extending an 18-month buying streak, and the Czech National Bank increasing its holdings. That buying continued even while gold traded well below its January peak, showing sovereign buyers did not pause simply because of price weakness.
What does the ETF-central bank divergence mean for gold’s price?
At surface level, ETF outflows are a bearish signal. That conclusion is technically correct but incomplete. The divergence highlights a change in who sets the marginal price of gold.
Through 2025, Western ETF buyers were the primary marginal buyers and helped drive gold from about $3,865 in October 2025 to $5,595 in January 2026 — roughly a 45% gain in four months. When geopolitical developments altered the Fed’s outlook in March, those buyers reversed their positions, turning record inflows into record outflows and contributing to the decline in prices.
Central banks, however, buy against a longer mandate. They have been absorbing part of the selling pressure and adding to official reserves. The ECB’s June 2026 International Role of the Euro report noted that gold has surpassed U.S. Treasuries to become the largest reserve asset by share for central banks, reflecting both sustained buying and the effect of price appreciation on existing holdings. These structural shifts unfold over years rather than quarters.
Does the central bank bid offset the ETF overhang?
The roughly 298-tonne underwater ETF overhang is real and will constrain near-term rallies. But sovereign buying is persistent. The World Gold Council survey found three-quarters of central banks expect the dollar’s share of global reserves to decline over the next five years, driving a multi-year shift into non-dollar assets such as gold.
When the ETF overhang eventually clears — whether through price appreciation above entry points or simply the passage of time — the sovereign bid is likely to remain. Central banks were buyers during the selloff and will likely continue to add through any recovery. For long-term holders of physical gold and silver, the key question is which buyers have the longer horizons, clearer mandates, and deeper pockets. The ETF overhang has a finite ceiling; the structural trend in central bank accumulation does not.
What should gold investors watch next?
Investors should monitor key macro data that influence Fed expectations. The May personal consumption expenditures (PCE) inflation reading — the Fed’s preferred inflation gauge — can shift rate-hike odds quickly. A core PCE print at or above the consensus range (roughly 3.3–3.4%) would likely extend the dollar’s strength and keep ETF selling pressure elevated. A softer print below that range would reduce September hike odds and could ease some break-even selling by underwater ETF holders. The next FOMC meeting is scheduled for July 28–29, making the intervening data releases especially relevant for market positioning.
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1. Reuters — Gold ETFs Could See Fresh Outflows on Rising Bets on Fed Tightening, June 24, 2026
2. World Gold Council — ETF Holdings & Flows (June 2026); Central Bank Gold Reserves Survey 2026 (June 16, 2026); Gold Demand Trends Q1 2026 (April 29, 2026); Central Bank Gold Statistics April 2026 (June 3, 2026)
3. Mining.com — Gold Overtakes US Treasuries in Global Reserve Shift: ECB, June 2026
4. CME Group — FedWatch Tool, September 2026 Rate Hike Probabilities, June 25, 2026
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Consult a qualified financial adviser before making investment decisions.
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