Gold Market Commentary and Outlook

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.

Record monthly ETF inflows took gold to its 39th new high for the year, finishing the month at US$3,825/oz (+12%). Y-t-d gold is up 47%, marking the highest return in a calendar year since 1979. Political tension, strong options market activity, and currency weakness played a key role in gold’s performance last month. Looking forward, there are plenty of reasons for investors to look at gold and the price could see further uplift should equities experience a correction. Perhaps only a major liquidity squeeze could upend both gold and equities, but there are no clear signs of fractures in credit or banking sectors…yet. 

A strong rally into month-end saw gold reach US$3,429/oz (+4%), and as of the end of August, gold was up 31% for the year. The move was supported by a weaker dollar, heightened geopolitical tensions, robust gold ETF inflows, and rising expectations for a September rate cut. Looking ahead, stagflationary pressures in the U.S., the prospect of lower rates, and ongoing policy risks could dominate price dynamics, even as emerging market demand takes a breather.

Gold edged up 1.7% m/m in July and remains up 28% y-t-d. The move higher was supported by rising inflation expectations linked to tariffs, though gains were partially offset by a stronger US dollar. Strong underlying fundamentals suggest that the gap between prices and COMEX positioning is more likely to narrow through increased net longs positions rather than falling prices.