Gold ETFs see third-largest weekly outflow on record, but analysts say don't write them off just yet

Gold's record-breaking run may be losing steam, at least for now.

Investment flows into gold funds dropped by $2.9 billion last week, the third-largest weekly outflow on record, according to Bank of America data cited by Barchart.

It also marked the biggest drop in net holdings in a decade, sowing fears that investors may be souring on the yellow metal after a historic rally.

The recent exodus is a U-turn for gold-backed ETFs and mutual funds, which have been major beneficiaries of 2025’s flight to safety. But not everyone thinks this trend will hold.

"This sharp outflow appears to reflect a confluence of tactical reallocations rather than a structural shift in sentiment," portfolio manager Lorenzo Cucco wrote on LinkedIn. “Long-term allocators are still there.”

Cucco believes much of the selling was driven by profit-taking after gold surged nearly 30% year-to-date, as well as short-term technical trends like import restrictions in India and foreign exchange pressures in China that weakened physical demand in Asia.

A historic rally powered by Trump tariffs and a weak dollar

Gold rallied in 2025 on the back of a unique mix of macro trends largely driven by President Trump’s sweeping trade policies.

Historically, Goldman Sachs analysts noted, institutional investors tend to increase gold exposure during geopolitical flare-ups, and the current U.S.-led trade war has been no exception.

Central banks have also accelerated their accumulation of bullion, buying 244 tons in Q1 alone, according to the World Gold Council.

“The long-run bull story for gold is that central banks are buying large amounts of it. We expect that to continue for at least another three years,” Goldman strategist Lina Thomas said recently.

A weakening U.S. dollar has provided another leg-up for Gold. The U.S. Dollar Index (DXY) has fallen 8.6% since the start of the year, making gold cheaper to global investors.

With the dollar still trending lower and central banks maintaining their appetite for gold, analysts expect the rally to continue. In fact, for the first time, a Reuters poll pinned gold’s average annual price over $3,000 per ounce.

That said, gold’s momentum could unravel just as quickly if Trump reverses course on trade policy and uncertainty fades. Last week’s sharp fund outflows are a reminder: gold is, at its core, a fear trade.