Despite gold's record run in recent weeks, the World Gold Council feels the yellow metal is still under-owned.

In a recent report entitled Gold Market Commentary: What’s the bull case at an ATH?, the council noted gold prices scaled new heights in March, finishing 8.1 per cent higher at US$2,214/oz by the end of the month. “A flat US dollar ensured that the strong return was reflected in all the major currencies,” the council noted in its report.

The WGC’s Gold Return Attribution Model (GRAM) suggested risk and momentum factors were behind the move higher. “Particularly instrumental was gold’s implied volatility, which shot up during March — as it did during September 2022, March 2023 and October 2023, although this time it was not accompanied by a rise in bonds’ implied volatility,” the report said.

In March, flows into gold ETFs were seen in all regions bar Europe. The Geopolitical Risk (GPR) index moved higher again, as geopolitical tensions convulsed across several fronts. “From a macro perspective — despite heady markets and a soft Fed — there was an important crossover in US data surprises suggesting stagflation risks might be on the rise again, a supportive development for gold prices,” the report noted.

With India, the world’s largest gold consumer, going into polls, the WGC predicts that the market will see little activity during the six election week period. “To boot, a diminished wedding season on the other side suggests that, all else equal, we should not expect to see any pent-up demand from Indian consumers in June,” the report said.

With gold reaching all-time highs the default assumption for most would be that positioning is likely crowded, as it appeared to be in 2011 for example, but that is not the case, the WGC said. “When assessing gold ETFs as a percentage of total US ETF assets under management, we found their percentage share is at the fourth lowest level since inception. While past performance does not guarantee future returns, it is worth noting that the last time positioning reached these levels gold embarked on a substantial move higher with considerable support from global gold ETFs,” the report said.

Gold is at an all-time-high and is getting attention. But assets at such levels are challenging for investors who think they may have missed the boat. “However, our analysis suggests that gold is currently well supported by fundamentals, and the low participation from US investors in particular augurs well for the rally to continue, in contrast to what we saw in 2011,” the report said.

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