Gold Rallied On Inflation Concerns, Reversing Its Recent Trend

SEATTLE (Scrap Monster): Inflation fears, weaker dollar and lower real rates ignited gold during the month of May this year, said the latest market commentary released by the World Gold Council (WGC). The prices of the yellow metal rose by nearly 7% over the previous month.

According to the Council, this is the second consecutive month that the yellow metal has registered healthy positive returns. The up move has helped to erase the losses accumulated during the initial quarter of the current year. Gold touched its highest level since January, thus moving back to above its 200-day moving average. It must be noted that the gold prices had registered around 11% dip in Q1 2021.

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The gold prices were positively influenced by several factors including strong ETF flows, a weaker U.S. dollar and lower real rates. Gold ETFs witnessed first net monthly inflows since January, with overall net holdings rising by 61.3 tonnes. The U.S. dollar index registered a fall of 1% in May. It has fallen by almost 3% from its peak touched in early-March this year. Interest rates continued to exert influence of gold in May 2021.

Fears over inflation should support gold prices in the short term. WGC cited monetary policy and inflation as the two primary factors that could determine gold’s direction in the near future.