Retail Investors Are at Their Most Bullish Ever on Gold despite The Strength of The Dollar as Inflation Builds
The comments below are an edited and abridged synopsis of an article by Zahra Tayeb
Retail investors are more bullish on gold than ever as concerns about US inflation ramp up, according to data from European derivatives trading platform Spectrum Markets.
Spectrum said its European Retail Investor Index (SERIX) hit a high of 116 in the past month, indicating the optimism among investors towards bullion, which can serve as a store of value in times of market turmoil or rising inflation. This was the highest such reading since the data series began.
A reading below 100 on SERIX suggests sentiment is bearish, while a reading above that level indicates bullishness.
“After a period of decline in May that saw the gold price drop below $1,800 USD on the 16th, the gold price started what looked like a new rally in the last few days of the month, supported by both the dollar and euro undergoing a weak phase,” said Michael Hall, head of distribution at Spectrum Markets in a note.
He added: “Considering the macroeconomic backdrop, it’s no surprise to see investors looking to take advantage of a dip in the gold price to make safe haven allocations.”
Gold tends to move inversely to the US dollar, but growing concern over the global rise in inflation has started to lure investors and prompted this correlation to break down. The dollar index has risen nearly 7% this year, while gold has gained almost 1%.
It comes against a backdrop of rising interest rates aimed at cooling inflation. Despite the Fed trying to control soaring consumer prices through interest rate hikes, retail investors are looking to gold as a safe haven against inflation.
Reinforcing a weak economic outlook, the World Bank has cut its forecast for global growth in 2022 to 2.9% from a previous projection of 4.1%, adding that for many countries, recession will be hard to avoid.