Gold showed impressive growth and increased by almost 8% during the previous month, which is the largest monthly increase since July 2020. The market sentiment remains fairly optimistic, with many analysts considering this year's gold price target of $ 2,000.
The precious metal was one of the last commodities to hit the history of inflation. Ultimately, the rally in gold created disappointing data on employment and retail trade in the United States, which helped keep prices above the level of $ 1,900 per ounce at the end of May.
Last month's data on higher inflation and cryptocurrency volatility also pushed many investors back into the gold market, which also pushed prices higher.
One of the main reversal trends in May was the return of demand from investors in the form of purchases of ETFs, which amounted to 49 tons.
According to Commerzbank analyst Carsten Fritsch, the demand among ETF investors should remain high due to high inflation expected in the next few months and negative interest rates. This will create additional good conditions for gold's growth.
Additional factors for the growth of gold are the low US dollar index and more or less high crude oil prices.
Commerzbank forecasts that gold production should be worth $ 2,000 by the end of the year, citing concerns about inflation and the Fed.
The Fed's debate about the probability of a reduction in bond purchases is still only under discussion, not a real reduction. If they took a more specific form, gold would be under pressure for a short time as it has been in past months, when yields have been rising. However, this is unlikely to put pressure on gold for any long period as long as the yield is below the inflation rate. Therefore, there is a chance that gold will rise to $ 2,000 per troy ounce.
However, a wave of profit-taking is also possible when gold's price approached the level of $ 1918 an ounce, which can result in a decline. In any case, gold can recover immediately and will be subject to correction.
But in the long term, gold's growth is likely to remain supported by the Fed's loose monetary policy.
