Insights on the current gold rally

Gold prices have rallied by 5.5% so far this month, hitting a record high of $2,164/oz this afternoon. In this report, we look at various factors that could potentially be behind the current rally. With the current data available we discount western investors as being behind the surge. Looking at China, we exclude consumer demand as being the cause. We conclude that central bank demand could be behind the surge as this would be a continuation of their efforts since last year. That said, central banks tend to avoid placing orders that shake the market. Another potential reason could be a fund taking a large position vis a vis Fed rate cuts or a negative macro outlook. The next CFTC data release will shed light on this.