(Kitco News) - While April saw the most significant price swings in the gold market in the last 25 years, May’s price action was not far behind.
Gold moved within a range of approximately $325 this past month, down from the $540 range seen in April. However, the average intramonth price swing since 2020 has been around $89.
It has been nearly impossible for investors to adjust to the rapid-fire shifts in U.S. policy. One moment, tensions in the trade war are cooling and everyone jumps into equity markets; the next, threats start to rise and gold regains its safe-haven luster.
In this environment, it's easy for traders and investors to become overwhelmed and emotional—conditions ripe for mistakes. As we quickly approach the halfway mark of the year, now is a good time for gold investors to take a step back and assess the broader landscape.
Rather than getting caught up in day-to-day volatility, investors need to stay focused on long-term fundamentals.
President Donald Trump’s weaponization of U.S. trade and his erratic policies continue to push central banks away from the U.S. dollar. Gold remains the only global monetary asset with no third-party risk. In this environment, central banks will continue to buy gold, while economic uncertainty and geopolitical chaos remain defining features of the marketplace.
Trade tariffs also continue to weigh on the economy. Updated data this week shows the U.S. economy contracted by 0.2% in the first quarter, slightly better than the initial forecast of a 0.3% decline.
Many economists have dismissed the weakness as a result of lopsided trade conditions, with producers stockpiling imported goods ahead of April’s ‘liberation day.’ While this is accurate, it dangerously overlooks the fact that U.S. consumption is slowing. The latest GDP data showed consumption increased by 1.2% in the first quarter, down from the initial estimate of 1.8%.
Slowing consumption was also reflected in Friday’s PCE data: personal income increased by 0.8% in April, but personal spending rose only 0.2%. The savings rate last month hit a one-year high of 4.9%.
Consumers are bracing for a potential economic storm—and that’s when gold shines the brightest.
That is it for this week. Have a great weekend!
Neils Christensen
Neils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His experiences include covering territorial and federal politics in Nunavut, Canada. He has worked exclusively within the financial sector since 2007, when he started with the Canadian Economic Press. Neils can be contacted at: 1 866 925 4826 ext. 1526 nchristensen at kitco.com @KitcoNewsNOW
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