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Gold is coming off three straight weekly gains, closer to wiping out its losses for the year after prices slumped during the January-March period. The precious metal has advanced on wobbles in the greenback and weakening treasury yields, and demand for bullion as a store of value is rising as inflation worries threaten to undercut economic growth.
Over the past week, hedge funds and other large speculators have raised their net-long position in gold futures and options to the highest since January, government data showed Friday. Holdings in exchange-traded funds backed by bullion also climbed in May following three months of outflows.
Investors were also weighing the extreme volatility in Bitcoin – widely viewed as an alternative to gold – which may have lent an added pillar of support. However, the cryptocurrency rebounded from its roller-coaster weekend on Monday, with prices on track for the biggest gain in more than three months.
“Gold prices are trending higher as weakness in cryptocurrencies and rising demand for inflation-hedge assets buoyed the appeal of the precious metal,” Margaret Yang, a strategist at DailyFX, told Bloomberg.
“Recent ETF data showed that investors are stockpiling the yellow metal for the first time since January, underscoring rising appetite.”
Related read: The bitcoin crash of 2021 compared to past sell-offs
“The recent move lower in real rates, accompanied by further US dollar weakness, have been the key drivers of gold’s rebound,” Morgan Stanley analysts led by Susan Bates said in a note on Monday.
“Still, we continue to see a risk of a sharper sell-off similar to that seen in 2013 once tapering begins in 2022, but in our base case we assume price remains supported in the $1,600s per ounce until the first Fed rate hike,” they added.
(With files from Bloomberg)
