HighlightsMay review<\/p>\n
Tariff news and inflation helped but momentum effects including ETF outflows, countered, to leave gold flat for the month.<\/p>\n
Looking forward<\/p>\n
Tariffs are starting to bite, but not where intended, pushing stagflation risks higher and hamstringing several central banks ahead of their June meetings.<\/p>\n
A bumpy May finishes flat\u00a0<\/p>\n
Gold prices ended the month of May almost flat (-0.7%) at US$3,278, albeit with some intra-month volatility. Year-to-date, gold remains up a staggering 26% (Table 1<\/strong><\/a>).\u00a0<\/p>\n Our Gold Return Attribution Model (GRAM<\/a>) suggests that tariff-related policy risk, a rise in inflation expectations (both Risk and Uncertainty factors) and lagged follow-through from the dollar plunge in April contributed positively, while ETF outflows and the strong gold return in April (both Momentum factors) were drags on returns in May (Chart 1<\/strong><\/a>).\u00a0<\/p>\n ETF outflows<\/a> of US$1.8bn (-19t) were dominated by North America (-US$1.5bn, -16t), on a pause in tariff tensions. Following a sizeable drop in COMEX managed money net longs<\/a> in April, investors increased net positions slightly by the equivalent of US$0.5bn (4t) in May. They remain well off the highs reached in December 2024 (35% net long as a % of open interest) sitting just above 13%.<\/p>\n \u00a0<\/a><\/p>\n Chart 1: Momentum factors proved a drag, while political risk, inflation and the US dollar supported the May return<\/p>\n Key drivers of gold\u2019s return by month*<\/p>\n GMC May 2025: Chart 1<\/p>\n Sources: *Data to 31 May 2025. Our Gold Return Attribution Model (GRAM) is a multiple regression model of monthly gold price returns, which we group into four key thematic driver categories of gold\u2019s performance: economic expansion, risk & uncertainty, opportunity cost, and momentum. These themes capture motives behind gold demand; most importantly, investment demand, which is considered the marginal driver of gold price returns in the short run. The \u2018residual\u2019 represents the percentage change in the gold price that is not explained by factors already included. Results shown here are based on analysis covering a five-year estimation period using monthly data. Alternative estimation periods and data frequencies are available on Goldhub.com.<\/p>\n <\/p>\n Table 1: Gold prices ended May flat, as profit-taking battled solid fundamentals ahead<\/p>\n Gold price and performance in key currencies*<\/p>\n Source: Bloomberg, World Gold Council Login or register to keep reading…<\/p>\n Login or register to read the text, view charts and download the files..<\/p>\n Registration is free, quick and easy. It gives you access to all downloads on this website.<\/p>\n Tariff tremors<\/p>\n A decision by US federal courts to block the Trump administration\u2019s sweeping tariffs lit a relief rally in risk assets on 29 May. However, this might only be temporary as several options appear available to the administration to sidestep the judement.1 <\/a>For now we assume little change.<\/p>\n Consensus sees tariffs as ultimately inflationary (See Chart 3<\/strong><\/a>). Yet only a faint ripple, like in the Jurassic Park water glass, has appeared so far. Official inflation data remains soft but the unofficial Truflation2<\/a> measure has picked up firmly (Chart 2<\/strong><\/a>).<\/p>\n And the reason it\u2019s expected is that despite the US administration\u2019s steadfast claim that tariff countries will pay, data hasn\u2019t confirmed it yet and markets are unsure.\u00a0<\/p>\n \u00a0<\/a><\/p>\n Chart 2: Official data not showing inflation\u2026yet\u00a0<\/p>\n Change in inflation measures since 1 April*<\/p>\n GMC May 2025: Chart 2<\/p>\n Sources: *Data from 1 April 2025 to 31 May 2025. Truflation is a real-time estimate of goods inflation calculated by TruLabs.<\/a>\u00a0<\/p>\n Let them eat tariffs<\/p>\n So who does foot the bill – the exporter, the importer, or the end consumer? So far, it appears that exporters are not absorbing the tariffs as US import prices, which exclude tariffs, are unchanged (Chart 2<\/strong><\/a>). If exporters like China were absorbing, those prices should be lower.3<\/a><\/p>\n Producer price index (PPI) data from April \u2013 which excludes imports \u2013 suggested a contraction in margins as capital equipment surged but core finished consumer goods did not. And final demand trade services prices, a proxy for margins, dropped by 1.6%.4<\/a><\/p>\n At least officially, and for now, US companies appear to be eating the tariffs, something which the public admonishment of Amazon and Walmart\u2019s attempt to pass on tariffs to consumers seems to back up.5<\/a><\/p>\n Stag, meet flation<\/p>\n But the expectation is that sooner or later, consumers will also feel the pinch. These dynamics of weaker margins and higher consumer prices have a stagflationary whiff about them, as consensus expectations lay bare (Chart 3<\/strong><\/a>).<\/p>\n \u00a0<\/a><\/p>\n Chart 3: Consensus expectations are stagflationary<\/p>\n Consensus GDP, CPI and unemployment forecast*<\/p>\n GMC May 2025: Chart 3<\/p>\n Sources: Prior research<\/a> shows that stagflation is an environment that particularly favours gold.\u00a0<\/p>\n The theory behind it is quite simple:\u00a0<\/p>\n Historically it hasn\u2019t always played out like this, but, on average, stagflationary episodes have been quite good for gold relative to stocks, cyclical commodities and bonds. But we don\u2019t necessarily have to wait for such an environment to play out. Further analysis suggests that stagflationary expectations are nearly as influential in driving gold\u2019s relative average outperformance (Chart 4<\/strong><\/a>), whether we get there or not.<\/p>\n \u00a0<\/a><\/p>\n Chart 4: Stagflationary expectations can also drive gold\u2019s outperformance<\/p>\n Performance of asset classes during stagflationary quarters*<\/p>\n GMC May 2025: Chart 4<\/p>\n Sources: *Quarterly data from Q1 2000 to Q1 2025. Stagflation defined as a quarter of rising GDP y\/y growth and falling y\/y CPI. These values are weighted by their magnitude so that large moves get a larger weight than small moves. Gold is the LBMA PM price, equities are MSCI USA and bonds are the Bloomberg US Treasury Agg index. ** Cmd represents cyclical commodities: Bloomberg BCOM ex Gold index. Expected stagflation measures the Survey of Professional Forecasters (SPF) 2Q ahead GDP growth and inflation expectations less 1Q ahead expectations. This is to avoid comparing 1Q ahead expectations relative to an ex-post revised actual GDP figure.<\/p>\n In summary<\/p>\n Last month<\/a> we discussed the Fed\u2019s dilemma in cutting rates, which they acknowledged in their May FOMC minutes.6<\/a><\/p>\n Other central banks are in a similar predicament: a surprise inflation surge in April will likely see the Bank of England<\/strong> err on the side of caution on 19 June<\/strong> and hold rates steady.7<\/a> The European Central Bank<\/strong> appears a little more concerned about growth and a cut on 5 June<\/strong> before a pause in July is on the cards,8<\/a> while the Reserve Bank of India<\/strong> is set for a third consecutive cut on growth concerns on June 6<\/strong>.9<\/a> And the Bank of Japan<\/strong> is expected to hold rates steady on 16 June<\/strong>, facing rising inflation alongside tariff-led growth risks.<\/p>\n
\n \t \t\tBloomberg,
\n \t \t\tWorld Gold Council; Disclaimer<\/a><\/p>\n\n \u00a0<\/td>\n USD
(oz)<\/td>\nEUR
(oz)<\/td>\nJPY
(g)<\/td>\nGBP
(oz)<\/td>\nCAD
(oz)<\/td>\nCHF
(oz)<\/td>\nINR
(10g)<\/td>\nRMB
(g)<\/td>\nTRY
(oz)<\/td>\nAUD
(oz)<\/td>\n<\/tr>\n\n May\u00a0price*<\/strong><\/td>\n 3,278<\/td>\n 2,888<\/td>\n 15,176<\/td>\n 2,435<\/td>\n 4,503<\/td>\n 2,695<\/td>\n 95,058<\/td>\n 768<\/td>\n 128,473<\/td>\n 5,096<\/td>\n<\/tr>\n \n May\u00a0return*<\/strong><\/td>\n -0.7%<\/td>\n -0.7%<\/td>\n 0.2%<\/td>\n -1.6%<\/td>\n -1.3%<\/td>\n -0.7%<\/td>\n 1.2%<\/td>\n -1.4%<\/td>\n 1.1%<\/td>\n -1.3%<\/td>\n<\/tr>\n \n Y-t-d\u00a0return*<\/strong><\/td>\n 25.6%<\/td>\n 14.6%<\/td>\n 15.0%<\/td>\n 16.8%<\/td>\n 19.9%<\/td>\n 13.8%<\/td>\n 25.2%<\/td>\n 24.6%<\/td>\n 39.2%<\/td>\n 20.8%<\/td>\n<\/tr>\n \n Record\u00a0high price*<\/strong><\/td>\n 3,434<\/td>\n 3,003<\/td>\n 15,707<\/td>\n 2,573<\/td>\n 4,741<\/td>\n 2,808<\/td>\n 98,228<\/td>\n 830<\/td>\n 132,083<\/td>\n 5,367<\/td>\n<\/tr>\n \n Record\u00a0high date*<\/strong><\/td>\n 22-Apr
2025<\/td>\n22-Apr
2025<\/td>\n08-May
2025<\/td>\n22-Apr
2025<\/td>\n22-Apr
2025<\/td>\n22-Apr
2025<\/td>\n22-Apr
2025<\/td>\n22-Apr
2025<\/td>\n02-Jun
2025<\/td>\n22-Apr
2025<\/td>\n<\/tr>\n
*As of 31 May 2025. Based on the LBMA Gold Price PM in USD, expressed in local currencies, except for India and China where the MCX Gold Price PM and Shanghai Gold Benchmark PM are used, respectively.<\/p>\n
\n \t \t\tBloomberg,
\n \t \t\tTruLabs posts on X,
\n \t \t\tWorld Gold Council; Disclaimer<\/a><\/p>\n
\n \t \t\tBloomberg,
\n \t \t\tWorld Gold Council; Disclaimer<\/a><\/p>\n\n
\n \t \t\tBloomberg,
\n \t \t\tMacrobond,
\n \t \t\tWorld Gold Council; Disclaimer<\/a><\/p>\n