Gold Surges 15% In One Month, Here's What Is Driving Bullion’s Strong Comeback?
Mumbai: Gold has climbed 15 percent in one month , marking its strongest rally in more than four months after a sharp correction. The precious metal crossed a record USD 5,500 an ounce in January before falling to nearly USD 4,600 by August. Despite its recent recovery, bullion remains around 16 percent below its earlier peak. Rising oil prices during the Iran conflict had fuelled concerns that…
In a recent surge, gold prices climbed 15% within a single month, showcasing the most significant rebound in over four months. The precious metal reached a record high of USD 5,500 per ounce in January but dropped to approximately USD 4,600 by August. Even with this recovery, the value of gold remains roughly 16% lower than its previous peak.
The rise in oil prices during the Iran conflict sparked fears of high inflation, which raised concerns about the Federal Reserve's potential to raise interest rates. This, in turn, put pressure on gold. However, ETF inflows have played a crucial role in the recovery, as renewed demand for gold exchange-traded funds (ETFs) has been a key driver of the rebound.
World Gold Council data indicates that approximately 23 tonnes were added to global gold ETF holdings. Inflows intensified during August, with roughly 45 tonnes added so far this month.
Institutional and retail investors' increasing exposure to bullion is evident in the strong inflows to ETFs. Central banks' buying of gold also contributes to the upward trend. During the second quarter, central banks purchased 288.9 tonnes of gold, a 62% increase from the previous year. Notably, South Korea's central bank resumed gold trading after a 13-year hiatus, bolstering expectations of sustained official-sector demand.
A recent World Gold Council survey revealed that 89% of respondents anticipate global gold reserves to rise in the coming year, with 45% planning to expand their own holdings. The dollar and bond yields have also supported gold, as hopes of unchanged Federal Reserve interest rates have provided a boost. Higher rates typically diminish gold's appeal since it does not generate interest.
The US Treasury intends to double buybacks of longer-dated government securities to at least USD 4 billion per operation in the upcoming quarter.
This move could help control long-term bond yields and exert pressure on the dollar, making gold more affordable for overseas buyers. However, investors should weigh their financial goals, risk tolerance, and investment horizon before incorporating gold into their portfolios.
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