March review
Gold had a strong March, as futures investors and green shoots from US gold ETFs help drive prices to new all-time highs.
Looking forward
ETF investors have catching up to do while Indian elections will likely stall local demand in April.
Venturing into uncharted price territory
Gold prices scaled new heights in March, finishing 8.1% higher at US$2,214/oz by the end of the month. A flat US dollar ensured that the strong return was reflected in all the major currencies we track.
The rally that started in early March left some commentators scratching their heads as to the cause. Our Gold Return Attribution Model suggested Risk and Momentum factors were behind the move higher. Particularly instrumental was gold’s implied volatility, which shot up during March — as it did during September 2022, March 2023 and October 2023, although this time it was not accompanied by a rise in bonds’ implied volatility (MOVE index) and therefore more suggestive of a gold-specific punt. In our Momentum bucket, COMEX managed money futures net positions had their third strongest month since 2019 on both short covering and fresh longs and we saw flows into gold ETFs in all regions bar Europe. The Geopolitical Risk (GPR) index moved higher again, as geopolitical tensions convulsed across several fronts. From a macro perspective – despite heady markets and a soft Fed – there was an important crossover in US data surprises suggesting stagflation risks might be on the rise again, a supportive development for gold prices.
