Gold Prices Hold Steady Amid Inflation Fears and Market Volatility
Gold prices remained stable in July, despite testing the $4,000 level several times. According to the World Gold Council's analysis, positive momentum factors offset negative risk factors, resulting in gold prices staying unchanged for the month. The price of gold finished July at $4,027 per ounce, down 8% year-to-date.
The council's Gold Return Attribution Model (GRAM) attributed the performance in July to both positive and negative factors. Sharp falls in gold prices are often reversed in subsequent periods, which countered a fall in risk factors including breakeven inflation and implied volatility. Rising yields were somewhat cancelled out by a falling US dollar.
Gold ETF flows supported the metal in July, with European funds leading the pack. However, it is unclear whether regional rotation out of equities or an attractive price point drove these inflows. Historically, European gold investors have shunned gold in positive real rate environments, making these inflows a welcome development.