The Federal Reserve is set to make an announcement today regarding monetary policy, which could further decelerate the number of inflows in gold if the Fed hawks loom overhead and the prospect of rising interest rates get higher, making the dollar stronger and weakening demand for gold.
Around the globe, the demand for gold remained muted in Q2 2018 at 964 tonnes, which is 4% below the same period in 2017, according to the World Gold Council’s latest Gold Demand Trends report. With respect to gold-backed exchange-traded funds (ETFs), slower inflows created a weak comparison against previous highs last year, contributing to the lowest first half demand since 2009.
Nonetheless, ETF inflows did continue, but at a much slower pace compared versus the high levels experienced in 2016 and 2017. Overall, inflows were down 46% year-over-year.
Economic pressures globally compounded by the strength in the U.S. dollar could hamper further gold ETF inflows. Looking at the year-to-date chart, the U.S. Dollar Index has been hovering above its 50-day moving average, but could be crossing the MA soon–a possible signal that an uptrend could continue.