All that is glittering is no longer gold?

Gold prices, which hit a record high last month, have eased somewhat on worries that the US Federal Open Market Committee will further push back rate cuts.

Spot gold prices hit a four-week low of $2,284.44 per ounce on May 1, down $147, or 6 percent, from the all-time high of $2,431.29 an ounce on April 12.

Global uncertainties, geopolitical tensions, and likely interest rate cuts are considered ideal conditions for safe-haven gold prices to rise. However, the fears of US interest rates getting pushed back further and ceasefire talks between Israel and Hamas have waned the haven demand.

According to the CME FedWatch Tool, most interest rate traders now expect the FOMC to push back interest rate cuts as late as November, compared with expectations of a June cut just a month ago.

The hopes of a ceasefire agreement in West Asia have also increased following the revival of negotiations between the two warring sides.

Do the traditional factors - real interest rates, growth expectations, and the dollar explain the scale of the gold price movement in 2024?

The gold's relative stability in the face of higher-than-expected US CPI inflation in March shows that gold's bull run is not driven by the usual suspects.

Most of the upside to gold since mid-2022 has been driven by new incremental physical factors, including acceleration in gold buying by emerging market central banks and Asian retail buying.

This is reflected in the latest World Gold Council report on gold demand. Total gold demand rose 3 percent on year to 1,238 tonnes in January-March, the strongest first quarter since 2016. The strong demand from central banks and over-the-counter transactions in January-March pushed up gold prices, it said.

The pace of central bank gold buying has not let up, with a net 290 tonnes added to the official holdings in January-March.

Global central banks have been amassing gold in the last couple of years. In 2023, they made annual net purchases of 1,037 tonnes, almost matching the record 1,082 tonnes in 2022.

The demand from emerging market central banks and retail investment provides the platform for a strong 2024. Any leveling off in the gold price in the months ahead should encourage some buyers back into the market.

For now, the demand has also tapered off in retail markets like India because of high prices.

Even as gold prices touched record highs, gold-exchange traded funds continued to face outflows globally. According to the World Gold Council, global gold-backed ETFs lost 114 tonnes in Jan-Mar, bringing the total holdings to 3,113 tonnes.

The possible explanation for this is that long-term investors are booking profits at higher levels.

There is upside potential in the gold ETF space as the shift out of gold and into positive-yielding bonds in Europe could run its course with the European Central Bank rate cuts looming.

The North American ETF investors banking on Fed rate cuts may have to wait a little longer.

Bulls buying gold at corrections suggests the strength of the rally. Only a much deeper correction could trigger an accelerated long liquidation.

According to World Gold Council Senior Markets Analyst Louise Street had an interesting take on the shifting behaviour of eastern and western investors.

"Typically, investors in eastern markets are more responsive to the price, waiting for a dip to buy, whereas western investors have historically been attracted to a rising price, tending to buy into the rally. In Jan-Mar, we saw those roles reversed with investment demand in markets such as China and India growing considerably as the gold price surged," Street said.

Demand for gold in India rose 8 percent on year to 137 tonnes in January-March, primarily driven by a rise in jewelry consumption and investment in gold.

While China's jewelry demand could remain stable to slightly higher compared to 2023, on rising incomes and stable prices during the rest of 2024, Indian jewelry demand will continue to draw support from the strong economy, but high gold prices and some election-related weakness may weigh on demand.

It is expected that 2024 is set to produce a much stronger return for gold than anticipated in December.

So, gold may continue to glitter.