(Kitco News) - Gold prices remain stuck in neutral, with prices starting the new trading week below $4,700 an ounce; however, analysts remain optimistic that prices will recover through the second half of the year as investment demand remains healthy, with global gold-backed exchange-traded funds seeing inflows in April.
Last month, 45 tonnes of gold valued at $6.575 billion flowed into global ETFs, according to the World Gold Council’s latest monthly report, published last Thursday. April’s increase was a welcome rebound from March’s outflows of 84.3 tonnes.
The WGC said that global holdings increased to 4,137 tonnes, the third-highest level ever and just below the record high of 4,176 tonnes set in February.
Looking at the regional breakdown of gold demand, the report said that European-listed gold ETFs saw the biggest inflows last month. European investors bought nearly 27 tonnes of gold in April, valued at US$3.7 billion.
“The UK led the surge, while Switzerland and Germany also contributed meaningfully. Positive flows in the region appeared linked to heightened geopolitical and geoeconomic risks, as investors assessed the inflationary implications of a more protracted Iran conflict and the associated pressure on energy prices,” the analysts said in the report.
North American investors remained a consistent presence in the gold market, with regional funds seeing inflows of 6.1 tonnes, valued at $1 billion.
Although investment demand among Western investors improved last month, analysts at the WGC said the market remains vulnerable due to the ongoing war in Iran.
The chaos in the Middle East has created a historic global energy supply shock, which is driving oil prices higher and igniting inflationary fears. Higher inflation could force central banks to take a more hawkish stance on monetary policy, raising rates and increasing the opportunity costs of holding gold.
Despite near-term downside risks, analysts at the WGC said that gold’s long-term uptrend remains intact, just waiting for a new spark to ignite another bullish rally.
“The near-term setup is not especially friendly. Gold is technically vulnerable, rate-cut expectations have moved out, and markets are treating the shock as temporary. Absent a fresh catalyst, this could remain a weak period for gold,” the analysts said.
While Western demand is expected to remain vulnerable, Asian investors continue to pile into precious metals.
The WGC said that Asian-listed gold ETFs saw inflows of more than 11 tonnes, valued at $1.8 billion. This is the eighth consecutive month the region has seen positive inflows.
“The region remains important to watch, with year-to-date flows currently on pace to challenge last year’s record total. China led the region: funds in Hong Kong SAR added US$732 million, a record month, supported by new product listings; and gold ETFs in Mainland China continued to draw inflows amid elevated geopolitical tensions, falling yields, and continued official-sector gold-buying announcements,” the analysts said.
