Forget the pandemic – as if we could – the story of the second quarter was inflation, specifically US inflation, and its impact on the gold price. Indeed, a snap-shot survey from a US economics team informed us that just during the month of May, more than 100,000 press articles were published about inflation – far more than on the topic of COVID-19.

Fears of inflation pushed gold up by over 11% in the first two months of the quarter to top out at $1,907.70 on Tuesday, 1 June. But from then on, all movement was downhill as investors became concerned about the possibility of early interest hikes by the Fed and their concomitant impact on the cost of holding gold, and the possibility of the US central bank beginning to taper its quantitative easing programme sooner than expected.

In short, and in response to comments by Fed Chairperson, Jerome Powell who said in mid-June that higher inflation readings were temporary and were due to “shortages and bottlenecks and the like,” remarks echoed by ECB Head Christine Lagarde who added that “inflation is temporary and technical and will fade as we head into 2022”, the gold price fell through the month by -7.58%, its second worst June performance this century.

Gold % Price Moves in June (2000 - 2021)

Source: LBMA (LBMA Gold Price)

It remains to be seen whether these Central Bankers are right in their assessment or whether more attention should be paid to distinguished economists such as Mohammed El-Erian who commented, on June 28, that, “Every day I see more evidence of inflation not being transitory, and I have concerns the Fed is falling behind.”

Despite the fact that silver is only rarely seen as an inflation hedge the price move through the second quarter was broadly similar to gold’s albeit with silver’s usual higher volatility. In short, silver began the quarter at $24.315, topped out on 15 May at $28.475 and ended June at $25.765, a 6.0% gain over the three-month period.

Looking at the numbers quarter by quarter, gold has been up 16 of the 22 quarters since the beginning of 2016 (73%) and silver 13 (59%).

Trading volumes for both metals were down by comparison to Q1. Gold daily turnover averaged 30.55mn oz ($55.5bn) for Q2, down 6.7% on Q1 (-5.8% in value terms). Silver daily turnover averaged 331.64mn oz ($8.9bn) for Q2, down 18% on Q1 (-19% in value terms).

Gold Price - % Gains/Losses by Quarter