While the relationship of inflation and gold prices appears more significant over the long term, US CPI on Thursday remains an important risk event for gold. Inflation has been shown to be more persistent than originally anticipated my most major central banks, which increases golds attractiveness due to its ‘store of value’ characteristic. Headline inflation is forecast for 7.3%, the hottest figure in over 40 years.
Alongside its safe haven allure, the precious metal has also been supported by rather sizeable net inflows (+ $2.169 billion) into the world’s largest gold ETF ‘SPDR Gold Shares (GLD)’, in 2022 thus far. The mechanism in which net-flow changes can affect the price of gold is through the ETF’s mandate to back investor inflows with actual gold. Therefore, rising inflows results in increased gold purchases.
