Gold ETFs Aren't As Important For Prices As You Might Think...

Authored by Simon White, Bloomberg macro strategist,

Gold ETFs hold only a fraction of gold stocks, and typically account for a relatively small proportion of bullion demand.

It is a truth universally accepted that gold ETFs are a major driver of price moves in the metal.

But it is one that shouldn’t be.

For instance, Skylar Montgomery Koning wrote earlier that precious metals are vulnerable to large speculative outflows from retail investors, citing the BIS.

The BIS in turn looks to be focusing on ETFs: the roughly $60 billion of retail inflows to gold they note from 2025 matches up with my own measure based on gold ETFs.

First, note that gold ETF holdings account for only a sliver - a mere 1.8% - of above ground stocks.

Now, that’s not a fair comparison as it includes non-monetary gold, such as for jewellery, tech and dentistry, etc.

Stripping out that doesn’t get us much higher.

Indeed, the 4.5% of monetary gold that ETFs account for is dwarfed by central banks’ holdings and bars and coin.

But markets are about flow, and prices are set on the margin.

ETFs are a bigger constituent of net demand for monetary gold.

The chart below shows that as a percentage of total demand by quarter, going back to 2010.

Here we can see ETFs’ net demand has risen in the last few years.

It hit about 25% in 2025, matching central bank demand (who did most of their buying in 2022 and 2023), but has turned down again in the last quarter of 2025.

Previous times that net ETF demand has gone decisively negative, such as 2013, 2016 and 2021, have coincided with drawdowns in gold.

If ETFs are bought with leverage, that can exacerbate price drops.

But with less gold to start with, the impact on price has the capacity to be less durable.

As Bloomberg's Jack Ryan notes, the Iran war is threatening to put a key driver of gold’s record-breaking rally into reverse.

A bigger issue is central banks...

Turkey has offloaded $8 billion of gold reserves this month in a bid to protect its currency from soaring energy costs and higher demand for dollars.

The country’s central bank sold and swapped about 60 tons of bullion over two weeks in March..

We'd suggest that has been the main driver of the recent decline.

That’s bigger than the outflow triggered by investors’ flight from gold-backed exchange traded funds over the same period, which was fueled by a dash for cash amid a broader meltdown in financial markets, rising bond yields and a resurgent dollar.

ETFs have lost only 13 tons, with that selling potentially triggered by Turkey’s move.

The war is putting a squeeze on liquidity; for consumers, who have to pay more for energy, and for some producers who are unable to sell their product.

“The narrative of central banks as perpetual one-directional buyers is being challenged,” said Nicky Shiels, head of metals strategy at MKS PAMP SA, a trader and refiner.

If more monetary institutions follow Turkey’s example, it would slow the overall pace of purchases and call into question long-term assumptions that central banks are loath to sell gold; then that is a vulnerability for the gold market, but the minority holders, ETFs, are not who will make the weather.