- The gold price rally gathered momentum, rising 7% on the month,1 driven by continued fears over inflation, a weaker dollar and lower real rates
- Gold recovered its Q1 losses, finishing May virtually flat y-t-d on the back of a significant technical breakout
- Sentiment toward gold continued to improve as net positioning on COMEX futures rose to its highest level since February
- Gold ETFs recorded their first monthly inflows since January and the highest since September
- In China, holiday- and wedding-related purchases supported consumer demand in May
- Indian consumer demand was heavily impacted by COVID-related lockdowns
- Sizeable purchases from Thailand and Hungary in recent months support expectation for healthy net purchases by central banks this year
- Looking forward, inflation and tightening concerns will be important drivers of gold in the near term, with the upcoming Fed and ECB meetings in the spotlight.
Most asked investor questions:
- Why choose gold when inflation-linked assets exist?
- How should we think of gold in relation to the possible commodity supercycle?
- Can gold benefit from weaker fixed income performance?
Gold rallied as inflation concerns took hold
Gold registered healthy positive returns for the second consecutive month, erasing the losses accumulated during Q1. Gold ended May at US$1,899.95/oz – its highest level since January and back above its 200-day moving average – representing a 7.5% m-o-m increase.2 This is a significant reversal in gold’s recent trend; having fallen almost 11% over this first quarter, it is now virtually flat y-t-d (0.7%) in US dollar terms.3 Similar performance was also seen across several currencies (Table 2), supported by a weaker US dollar.
This is corroborated by our short-term model, which indicates that key drivers of gold’s performance during May included momentum, a depreciation of the US dollar, and lower real rates (Chart 1).