SPDR Gold Trust, the world's largest physically-backed gold fund, saw its holdings drop more than 7 percent in July, as investors dumped bullion for other assets like equities and led it to its biggest monthly decline since April 2013.

Holdings in the exchange-traded fund (ETF) dropped about 55 tonnes in July, leaving volumes at 791.88 tonnes of bullion worth about $32 billion.

"Equities, no doubt, have an impact on the performance of gold-backed ETFs in the short term ... Despite geopolitical tensions with North Korea and the shake-up in the Trump administration, equity markets seem to be taking them in their stride," said Vergel Villasoto, director at Singapore-based Silver Bullion.

Other factors hitting gold-backed ETFs include the rate hike by the U.S. Federal Reserve in June and the European Central Bank potentially tightening monetary policy later in the year.

"These announcements have a negative impact in ... demand for safe haven assets like gold or silver," Villasoto said.

Gold prices are currently hovering near seven-week highs, but non-yielding bullion may come under pressure if the Fed raises interest rates later in the year.

Wall Street's Dow Jones Industrial Average on Tuesday broke the 22,000-barrier for the first time in its 121-year history. The index has outperformed gold this year with an 11.4 percent gain compared to gold's roughly 10 percent rise.

"We are still positive on global growth this year and next year. Hence, there should not be too much support from safe-haven buying for gold until the end of 2018," said Carsten Menke, analyst at Julius Baer. While most of the outflows in July were concentrated in SPDR, overall holdings in gold ETFs, including COMEX Gold Trust , fell about 4 percent last month..

"It is quite surprising to see these kinds of outflows in an environment where gold has been benefiting from a weaker U.S. dollar and improved market sentiments," analyst Menke said.

Any renewal of concerns, however, about global financial markets or geopolitical stability could restore gold's appeal.

"The last few years show that sentiment among investors can change quickly. Gold ETFs posted massive inflows in H1-2016 as a result of financial market turmoil and political risks," said Commerzbank analyst Carsten Fritsch.

"The same can easily happen again."