Gold prices maintain upward momentum, albeit at a slower pace

DNVN - The World Gold Council (WGC)'s May Gold Market Commentary shows the continuous increase in gold prices, with a 2% increase to 2,348 USD/ounce, marking the third consecutive monthly increase.

Despite a smaller gain than in March and April, gold prices still hit an all-time high of $2,427 an ounce in mid-May before falling. The market excitement pushed long managed money positions on the COMEX (US futures exchange) to a four-year high, and gold exchange-traded funds (ETFs) recorded net inflows of $529 million for the first time since May 2023.

The WGC’s Gold Yield Allocation Model (GRAM) does not point to any single variable that drove gold’s performance in May. Positive factors include gold’s price momentum and a weak US dollar, but the impact is negligible. The biggest factor remains the unexplained component, which could be attributed to decentralized, off-exchange gold trading and strong central bank buying.

The weakening of the US dollar could benefit gold.

Gold-backed ETFs recorded their first monthly inflows since May 2023, with a total value of $529 million, increasing their total assets under management (AUM) by 2% to $234 billion, the highest level since April 2022. However, the amount of gold in the fund is still 8.2% below the average level in 2023.

ETFs in Europe and Asia drove global flows, with Asia recording its 15th consecutive monthly inflow of $398 million in May, which was the lowest since November 2023.

Meanwhile, China led the region’s gold demand as domestic gold prices hit record highs and its currency weakened, while Japan saw strong inflows thanks to attractive domestic gold prices. Asia has attracted $2.6 billion so far in 2024, making it the only region to see inflows into ETFs, and total assets under management in Asia have increased by 41%, the highest on record.

“The gold market is dependent on US growth and inflation data,” said Shaokai Fan, regional director for Asia-Pacific (excluding China) and global head of central banks at the World Gold Council. “The US dollar reversed course in May after a long rally since early 2024 as inflation trended lower, giving the US Federal Reserve more flexibility to adjust interest rates. A weaker US dollar could benefit gold. In addition, the US dollar is heavily influenced by weaker economic data and ongoing global growth outside the US could dampen its performance.”

Gold has recently almost outperformed the US dollar as buyers in emerging markets appear to be paying less attention to the US dollar or expectations of Western monetary policy, a weaker dollar in the future could attract Western investors back to the gold market who are waiting for a boost.

Hoang Phuong

Source: https://doanhnghiepvn.vn/kinh-te/gia-vang-duy-tri-da-tang-du-toc-do-cham-hon/20240614015040949