The World Gold Council (WGC) on Thursday said that it expects US policy and structural risks to continue driving gold investment. Profit taking could bring a pause but may also encourage consumers, WGC said.
Gold continued its ascent in April, breaking the US$3,500/oz mark in intraday trading during the month. While gold pulled back from its record highs, it still finished strong, above US$3,300/oz and rising by 6% month-on-month. Gold’s return was more modest in developed market currencies and even fell slightly in Swiss francs on the back of local currency strength versus the dollar.
WGC’s Gold Return Attribution Model points to the significant plunge in the US dollar, captured by ‘opportunity cost (FX)’, as one of the key drivers of gold’s performance in April. Other contributing factors were a spike in market volatility and geopolitical concerns (‘risk and uncertainty’). The model also suggests that there was a degree of mean reversion that created a drag on gold’s performance, as some investors likely took profits following four consecutive months of strong returns.
Meanwhile, due to increased geopolitical tensions in the Middle East, Eastern Europe, and India-Pakistan, as well as ongoing market uncertainty over U.S. trade policies, gold is up 2% on the week.
Ahead of a planned meeting between US and Chinese officials in Switzerland, President Trump said he would not consider lowering the US’s 145% tariffs on China to advance trade-war negotiations with Beijing, stifling hopes for a breakthrough.
In the meantime, the Federal Reserve reaffirmed its cautious approach on future rate changes by warning of growing inflation and unemployment risks and holding its benchmark interest rate constant as anticipated, which put pressure on gold. In addition, Fed Chair Powell stated that the central bank is not contemplating a proactive rate reduction in reaction to the possible economic consequences of Trump’s tariffs.
Gold continued its ascent in April, breaking the US$3,500/oz mark in intraday trading during the month. While gold pulled back from its record highs, it still finished strong, above US$3,300/oz and rising by 6% month-on-month. Gold’s return was more modest in developed market currencies and even fell slightly in Swiss francs on the back of local currency strength versus the dollar.
WGC’s Gold Return Attribution Model points to the significant plunge in the US dollar, captured by ‘opportunity cost (FX)’, as one of the key drivers of gold’s performance in April. Other contributing factors were a spike in market volatility and geopolitical concerns (‘risk and uncertainty’). The model also suggests that there was a degree of mean reversion that created a drag on gold’s performance, as some investors likely took profits following four consecutive months of strong returns.
Meanwhile, due to increased geopolitical tensions in the Middle East, Eastern Europe, and India-Pakistan, as well as ongoing market uncertainty over U.S. trade policies, gold is up 2% on the week.
Ahead of a planned meeting between US and Chinese officials in Switzerland, President Trump said he would not consider lowering the US’s 145% tariffs on China to advance trade-war negotiations with Beijing, stifling hopes for a breakthrough.
In the meantime, the Federal Reserve reaffirmed its cautious approach on future rate changes by warning of growing inflation and unemployment risks and holding its benchmark interest rate constant as anticipated, which put pressure on gold. In addition, Fed Chair Powell stated that the central bank is not contemplating a proactive rate reduction in reaction to the possible economic consequences of Trump’s tariffs.
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