Gold In Q2: Price Stabilizes, While Potential Catalysts Build

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The big story in Q2 was the jump in CPI numbers as lockdown restrictions eased across many parts of the world. Our ITV report examines the performance of gold and other major asset classes during the second quarter and year-to-date, along with a review of the conditions that could impact precious metals in the second half of the year.

Gold in Q2: Price Rebound

After taking a hit in Q1 from spiking yields, gold responded to headlines of spiking inflation in Q2. Here’s how gold and other major asset classes performed in the second quarter.

Despite falling 7% in June—its worst monthly drop since November 2016—gold ended the quarter 4.3% higher. Silver outperformed gold, gaining 7.4%. Platinum underperformed, while palladium gained. Oil prices stole the spotlight, shared by commodities and real estate prices. It’s also noteworthy that the S&P 500 ended the quarter at a record high.

On the negative side, Bitcoin (BITCOMP) fell over 40% recently, once again highlighting its volatility.

Gold YTD: Just Below the Zero Line

Despite a 13% run mid-quarter, gold ended the first half of the year negative. Gold struggled last month when Fed officials indicated an increased likelihood of interest rate rises in 2023. Higher inflation could push the Fed to raise rates.

While the kneejerk reaction may be to sell gold if nominal rates rise, the real rate (10-year Treasury minus the CPI) has the most influence on the price. Negative real rates look to remain indefinitely, even if the Fed raises the nominal rate.

What Does 2H Bring?

As we begin the second half of the year, to state the obvious, this will be no ordinary summer. Much of the world is slowly exiting the pandemic, the easing of restrictions accompanied by an eagerness to travel. Meanwhile, reflation remains a dominant driver for many asset prices. This and more are some of the factors that could impact economies and markets. Here’s what we’re watching that will likely have the most effect on precious metals.

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