After rising almost 11% in January, gold Comex futures have declined three months in a row, ending April at $1,664.2. Year-to-date gold futures gained 6.3% compared to 10.8% for the MSCI World (Developed Market) Index, 2.2% for the CRB Index and -17% for the Dollar Index. From this year's peak reached on Feb. 28 at $1,792.7, gold futures declined 7%.
While spot gold in US dollars has not recovered from its early September peak of $1,921.1, gold bar per 10 grams in India has reached an all-time high at 29,600 INR on April 30.
What might have caused the different performance of gold? In the developed market, the gold price has been see-sawing recently as investors weigh the economic data in the US, policy statements from the Federal Reserve, re-ignition of the European sovereign debt crisis and central banks' gold purchasing actions.
Gold bounced on the news of slower than expected US Q1 gross domestic poduct growth of 2.2% last Friday compared to Bloomberg's median forecast of 2.5%. However, gold retreated slightly on Monday and Tuesday as the US ISM factory index climbed higher to 54.8 in April compared to a forecast of 53 while the China PMI rose slightly to 53.3 in April, the fifth monthly expansion. Investors used the stronger data as an excuse to buy more equities. The news that both the UK and Spain went into recession in Q1 and expectation that Spain's high unemployment rate could jump from the current level of 24% to 30% also stall the gold run.
In India, festival and marriage season demand for gold has helped push the gold price higher. The weak rupee which declined 19% in the past year caused gold to reach an all-time high despite the fact that gold in US dollars is still 15% lower than the recent peak. Uncertainty in both the Indian economic performance and its investment-grade rating would cause people to seek gold for a safety hedge while a weaker rupee would bump up local price.
The European Central Bank interest rate announcement this Thursday and the US April non-farm payrolls and unemployment rate on Friday are interesting events to watch to gauge the short-term direction of gold.