Recently World Gold Council (WGC) published their Gold Market Commentary for April 2024, & said, Higher-for-longer: Inflation not growth!
Gold had another good month in April, posting a 4% gain and ending the month at US$2,307/oz. Unlike March, gold finished off its intra-month high from probable buyer reticence and profit taking – reflected in falling Chinese premia, lower Indian imports and flat-lining Comex positioning.
On the flipside, the trend in North American gold ETF flows turned positive – albeit slightly – joining strong demand for Asian ETFs. Turning to our Gold Return Attribution Model (GRAM), existing variables and their longer-term relationships to gold returns have, for the second consecutive month, failed to capture price strength in its entirety.
Adding a geopolitical risk proxy as well as positioning in the Shanghai futures exchange offers an explanation for some of the moves in March and April, but one other major explanatory factor is still missing. In this context, we believe that central bank buying, as recorded in our recent Gold Demand Trends report and evidenced in higher LBMA volumes, was once again a significant contributor to gold returns.
While looking ahead, the WGC said, the no-landing, viewpoint has shifted from marginal to mainstream, supporting a higher-for-longer (H4L) policy rate outlook. Yet the growth outlook is precarious in our view, in need of further government spending support and reliant on shaky labour market health: both factors that open the door for event risk.
Meanwhile, inflation remains sticky and the outlook seems to point once again to stagflation, which, in turn, is helping the case for gold and could encourage Western investors to join strong demand from central banks and Far East buyers!
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