Gold Market Commentary

Positive momentum factors offset negative risk factors to leave gold prices unchanged in July. A second wave of high inflation, similar to the late 1970s, cannot be ruled out. But it does not imply a major gold rally on its own. That depends on how real rates, the US dollar, growth expectations, Asian investor demand and central banks respond.

Gold fell 1% in May, on continued positive risk sentiment and modest global gold ETF outflows. The Fed may need to hike rates as inflation pressures mount. We make the case for why it could – surprisingly – benefit gold.

Gold ended April flat, as a return of risk appetite weighed on gold, but a weaker US dollar and ETF inflows led by Europe provided support. Short term headwinds could sustain some gold weakness as it searches for a catalyst to regain the structural uptrend.

March was the weakest month for gold since June 2013, a move driven by deleveraging and liquidity dynamics, not fundamentals. Looking ahead, there are some green shoots for gold to re-establish its positive trend but short-term risks remain.

Gold gained 5% in February on dip buying, dollar weakness and softer US Treasury yields. 
Looking forward: Medium-term trend for the US dollar is likely to resume – post some near-term respite – and provide further support for gold prices.

A staggering 14% rally in January took gold above the US$5,000 mark, cementing the 5k number as a headline to match the first recorded annual 5,000 tonnes of total demand.

Gold tagged its 53^rd all-time PM price high for the year of US$4,449/oz on 23 December, before closing the year at US$4,368/oz. It was a stellar finish to a stellar year – posting a December return of 4.2% to take the full year return to 67%. Relatively stable FX led to similar returns across major currencies.

A momentum flush out and stronger dollar contributed to a see-saw for gold from its 50th all-time high. But gold still managed good gains in October.