Gold Surges 15% in One Month Amid ETF Inflows and Stable Interest Rates

Gold prices have surged by 15% in just one month, marking its strongest rally in more than four months. The precious metal had dropped to nearly $4,600 an ounce in August after reaching a record high of over $5,500 in January.

The recent recovery can be attributed to several factors. One key driver is the renewed demand for gold exchange-traded funds (ETFs). Inflows into these funds have picked up pace, with around 45 tonnes added month-to-date, according to World Gold Council data. This trend suggests that institutional and retail investors are increasing their exposure to bullion.

Central banks also continue to purchase gold, adding 288.9 tonnes in the second quarter - a 62% increase from the previous year. South Korea's central bank has returned to buying gold after a 13-year absence, bolstering expectations that official-sector demand will remain firm. A World Gold Council survey found that 89% of respondents expect global gold reserves to rise over the next year.

Hopes for stable interest rates and lower bond yields have also contributed to gold's rebound. The US Federal Reserve's decision not to raise interest rates has reduced the appeal of holding gold, which does not offer interest. Meanwhile, the US Treasury plans to double its buybacks of longer-dated government securities, potentially controlling long-term bond yields and putting downward pressure on the dollar.