April was strong for gold but ‘stagflation’ concerns abound – WGC
According to the World Gold Council (WGC), gold had another good month in April, posting a 4% gain and ending the month at $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 exchange-traded fund (ETF) flows turned positive – albeit slightly – joining strong demand for Asian ETFs,” the WGC said on May 8.
It noted that gold hit new all-time highs in April but pulled back by month-end, with Chinese buying and central banks being major drivers of support.
Looking forward, the WGC said “stagflation” risks were on the rise.
“Growth looks fragile while inflation remains problematic. Asian investors may continue to draw attention,” it added.
In terms of the WGC’s Gold Return Attribution Model, existing variables and their longer-term relationships to gold returns have failed to capture price strength in its entirety for the second month in a row.
The WGC said that 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.
However, the WGC is of the opinion that one other major explanatory factor is still missing.
In this context, the WGC believes that central bank buying, as recorded in the recent WGC Gold Demand Trends report and evidenced in higher London Bullion Market Association volumes, was once again a significant contributor to gold returns.
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