Gold still under-owned, global body says

World Gold Council

Despite gold's recent surge in value, the World Gold Council maintains that the precious metal remains under-owned. In their recent report, they highlight several factors contributing to gold's continued strength in the market.

The report, titled "Gold Market Commentary: What’s the bull case at an ATH?" notes that gold prices reached new heights in March, ending the month 8.1% higher at US$2,214/oz. This increase was observed across major currencies, thanks in part to a stable US dollar.

The council's Gold Return Attribution Model (GRAM) suggests that risk and momentum factors have been key drivers of this upward trend. Notably, gold's implied volatility surged in March, a pattern seen in previous years but not accompanied by a rise in bonds' implied volatility.

March also saw significant inflows into gold Exchange-Traded Funds (ETFs) across regions, except Europe. Geopolitical tensions added to the market uncertainty, contributing to higher demand for gold as a safe-haven asset.

India's upcoming elections and a subdued wedding season further affect gold market dynamics. The WGC predicts reduced activity during the election period and minimal pent-up demand from Indian consumers in June.

Despite gold's all-time highs, the report indicates that investor positioning is not overcrowded, especially in US ETFs. Comparing gold ETFs as a percentage of total US ETF assets under management, the report highlights that their share is currently at its fourth lowest level since inception. This suggests that there is room for further growth in gold investments, supported by solid fundamentals.

While some investors may feel they've missed the opportunity to invest in gold given its record-breaking performance, the report suggests otherwise. It emphasizes that gold's current strength is backed by strong fundamentals, and the relatively low participation of US investors bodes well for continued rally, unlike the situation observed in 2011.

In conclusion, despite reaching unprecedented highs, gold's journey is far from over. With geopolitical uncertainties, macroeconomic factors, and investor sentiment all playing a role, gold remains an attractive asset for investors seeking stability and long-term growth potential.