Gold will increase sharply when the Fed reduces interest rates"Capital inflows were widespread, with all regions recording positive increases except for North America, which saw a slight decline for the second consecutive month. Overall, yields fell across regions important and the weakening USD has made gold more attractive to domestic investors," analysts said.
"Lower interest rates are a key factor driving capital flows into the region," analysts said. Additionally, cooling stock markets and political uncertainties related to elections in The UK and France, which have sparked significant capital inflows, have also boosted investor interest in gold.
Although North American gold demand remains tepid, analysts note that it could easily reverse if the Fed starts cutting interest rates. The market forecasts about a 70% chance that the Fed will cut interest rates in September.
"A strong dollar and continued stock market growth may have drawn investors' attention away from gold despite falling US government bond yields," analysts said. "However, flare-ups in geopolitical risks prompted episodic capital inflows, partially offsetting larger outflows during the month."
