Gold’s roller-coaster ride likely to continue in May amid geopolitical tensions

Gold has been on a roller-coaster ride in April while the euro and the British pound rose to their strongest levels in half a year amid the many geopolitical tensions during the month, a trend analysts believe is set to continue in May.

Gold stood at US$1,264.30 per ounce on Friday after losing 1.5 per cent on Monday. It shot up 2.6 per cent in the middle of April to a five-month high before ending the month 1 per cent stronger. The yellow metal has risen 10 per cent this year.

Political events have driven the roller-coaster ride, with the monthly high of US$1,290 per ounce coming on April 14, a day after the United States dropped its largest non-nuclear bomb ever used on Afghanistan. Tensions also persisted between North Korea and the US as President Donald Trump vowed to take unilateral action to stop Pyongyang’s nuclear programme unless China is able to constrain its neighbour.

The reversal that saw gold drop 1.5 per cent on Monday came after pro-Europe, independent centrist Emmanuel Macron took the lead in the first round of voting in the French presidential election the day before. Macron is leading in polls to win the presidency over far-right nationalist Marine Le Pen in the second-round election on May 7.

Expectations that Macron will win the run-off election led to a more stable political situation in France as he supports the country remaining in the European Union whereas Le Pen is in favour of leaving, an outcome that prompted investors to abandon the safe-haven investment of gold to bet on riskier assets such as stocks and the euro, which helped propel the French stock market to a nine-year high last week while the euro hit a 51/2-month high.