Gold was not doing very well, fluctuating between $3,200 and $3,300 per troy ounce. This calm came in the wake of shifting markets’ reactions to weaker-than-expected US inflation figures for April. The precious metal’s stellar performance underscores the muddled lexicon of economic data paired with almost daily trade turmoil.
In recent trading days $gold has been stuck below the $3,300 barrier. According to analysts, this unexpected stability can largely be attributed to the mixture of low inflation numbers and unpredictable US Treasury yields. This latest inflation data was, on the whole, more encouraging than expected. This has led investors to reconsider their expectations for the path of monetary policy going forward and its likely impact on gold prices.
This has provided gold with a defensive boost on weaker inflation readings. Yet they are a sign of a broader potential decoupling, or slowdown in economic growth. In this environment, investors flock to safe-haven assets, such as gold. They do this to inoculate themselves against uncertainty and volatility in financial markets. Despite repeated pressure from the lower-than-expected inflation data, gold has continued to be surprisingly resilient thanks largely to external and more bullish factors.
Trade uncertainties continue to plague global markets, adding a complicated layer of complexity to ag commodity pricing. Great economy interplay underneath formation negotiations produces a cooperative meanwhile combative atmosphere that has investor anxiousness sky-high. This uncertainty increases gold’s attractiveness, capping the metal’s downside potential. Traders often rush to gold when geopolitical or economical turmoil begins. This trend continues to strengthen gold’s long term safe-haven asset appeal.
Declining US yields have been an important supporting force for gold as well. When US Treasury yields fall, the opportunity cost of holding non-yielding assets such as gold declines. These conditions combine to create higher demand for gold among investors looking to protect capital in foiling markets.