Gold ETF saw large outflow despite torrid rally

2024-04-02
Summary:

Gold trimmed gains on Tuesday after hitting a new high. Expectations of Fed rate cuts drove the rally as US inflation eased in the past month.

Gold pared some of its gains on Tuesday after rising to a fresh record. Growing expectations that the Fed is getting close to rate cuts fuelled the rally as data showed that inflation cooled in the US last month.

A host of positive drivers have boosted bullion by around 9% this year. Rising geographical tensions in Europe and the Middle East and robust China demand also contributed to the gains.


Meanwhile, bullion prices hit record highs in other currencies, including euro, sterling, the yuan, and Indian rupees. Despite US economic resilience, it remains uncertain if the recovery is durable in China and Europe.


China’s home sales slump dragged on in March, signalling a turnaround for the sector is not in sight yet. The value of new-home sales from the 100 biggest real estate companies slid about 46% from a year earlier


The eurozone is facing weaker-than-expected growth prospects over the next two years and inflation may recede as rapidly as many would hope, S&P said in its updated report.


Dim outlook for the economies may finally weigh on risk-on mood. Global holdings in gold ETFs shrank by more than 100 tons in the Q1, hitting the lowest level since 2019 in mid-March, according to Bloomberg.

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Investors prefer the metal to bonds for hedging though the latter are offering high yields. Gold’s strong performance has defied its RSI index pointing to overbought with the support area sitting around $2,200.


Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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