Gold fails to shine in May, dips nearly 4% on weak ETF outflows momentum – Know what analyst says

The precious metal – Gold failed to shine in May 2022 as the global gold ETFs (Exchange Traded-Funds) ended their four-month run of positive inflows in the previous month, a World Gold Council said in its monthly performance report on the yellow metal earlier this week.

The Gold ETF outflows of US $3.1 billion, which is the largest monthly outflow since March 2021 and total holdings remain 8 per cent higher year-to-date at US $226 billion, the report said.

Gold fell nearly 4 per cent in May, leaving it just under 2 per cent higher on the year at US $1,839/oz, the pullback was largely driven by weaker momentum via ETF outflows and the lowest level in net long positioning on COMEX futures in a year, WGC report also said.

Strong bi-directional equity volatility failed to support gold prices as short-term momentum waned and outflows of global gold ETFs in May were the two main reasons for the precious metal to lose its shine in the previous month, the council said in its report.

Gold has failed miserably in terms of capitalizing on the potential tailwinds in the form of persisting geopolitical tensions emanating from Russia/Ukraine and US/China, struggling global equities, and negative real rates, Hitesh Jain, Lead Analyst – Institutional Equities, YES Securities said.

The lead analyst further stated that even the recent retreat in the General dollar index has not triggered any buying, which stokes concerns that gold as an investment avenue is out of the reckoning amid the rapidly evolving global variables.

The fact that it is responding poorly to what should be bullish news, conveys that the yellow metal does not have much upside short-term potential, Jain also pointed out in its note.

The rising US dollar and higher interest rates weighed on gold in early May. Momentum from ETF outflows also fuelled the move down to US$1,800/oz mid-month, WGC report stated, adding that Gold swiftly recovered from that level – with a dollar pullback and lower US 10-year real yield lending support – but the rebound ran out of steam and it closed the month hovering US$1,850/oz.