The yellow metal is slowly clambering out of the pit it fell into last month. Having slumped to $1,350 an ounce in mid-April, it has since regained the $1,450 mark and hovered around this level for a fortnight.
On the plus side, Asian and American buyers have flocked to scoop up some cheap coins or bars, says Emiko Terazono in the FT. The US mint says that sales of American Eagle gold coins reached their second-highest level in a decade last month, eclipsed only by December 2009.
Strong physical demand has put a floor under the gold price, but the "upside seems limited", given investors are still reducing their holdings of paper gold assets, such as exchange-traded funds and futures, says Saxo Bank.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Yet this trend seems likely to reverse in the future as the investment case remains solid. Central banks are keeping monetary policy loose, with the European Central Bank cutting rates and Japan and the US continuing to print. Low real interest rates and printed money will continue to debase currencies and could eventually fuel a sharp jump in inflation.
There is also still ample scope for geopolitical tension and a worsening of the euro crisis. Gold may be in the doldrums for now, but the bull market that began in 2001 doesn't look to be over yet.
