Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here! The WGC said that the challenging economic environment presents obstacles and opportunities for the precious metal. In their mixed outlook, the analysts said that persistent inflation pressures coupled with growing market uncertainty will support gold prices through the rest of the year.
The report said that physical gold demand fell by 948 tonnes or 8% compared to the second quarter of 2021. However, physical gold demand in the first half of the year totaled 2,189 tonnes, up 12% compared to the first half of last year. "Although inflation may start to tail off in H2, the supply situation in many commodity markets remains precarious and renewed spikes can't be ruled out. Such an environment would further highlight the safety of gold. After all, gold's relative performance remains solid in 2022, buttressing its diversification benefits compared to other hedges," the analysts said. "In addition, geopolitics are always a wild card and remain top of mind for investors.
"Persistent inflation concerns supported investment inflows into gold, but monetary tightening and a surging dollar were likely major drivers of outflows. These pressures increased at the tail end of the quarter as the U.S. Fed adopted a more aggressive tightening pace and as fears grew over potential recession alongside a collapse in commodity prices," the analysts said.
However, the WGC said that it expects central banks to continue to be net buyers of gold, even if the pace slows through the rest of the year. At the same time, China's ongoing COVID lockdowns continued to weigh on the market, with jewelry demand falling 29% compared to last year.
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