Recently World Gold Council [WGC] published Gold Market Commentary, & said, Stubborn stagflation! Gold closing in on new highs! 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.
Gold gained in all major currencies, despite a much weaker US dollar. And the positive momentum has carried on in early September. Our Gold Return Attribution Model (GRAM) suggests major contributors to August price performance were a drop in the US dollar early in the month, continued geopolitical tensions, and strong global gold ETF flows.
More recently, a higher chance of a September rate cut has also played a role. Gold ETF flows provided plenty of support, especially late in the month, posting US$5.5bn (53t) of inflows, dominated by North America (US$4.1bn) and Europe (US$1.9bn), while Asia and other regions saw outflows. COMEX managed money net longs saw more restrained inflows of US$2bn (+16t).
Talking about Stubborn stagflation, WGC points;
1: US real rates may become more influential for gold in the near term as US investors grab the baton from emerging markets, and that influence could increase if rates were to fall.
2: So far rates have been sticky, but that is more reflective of a growing unease about stagflation and 3: Our quantitative analysis of various US investor types suggests that stagflation is of greatest concern to ETF investors, followed by retail bar and coin buyers. Fast money futures investors are more concerned with rate trajectory.
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