Gold’s record-breaking run continues
Saxo’s Weekly Commodity Update
By Ole Hansen, Head of Commodity Strategy at Saxo
Following last month’s strong rally, which saw gains across all sectors, performances have turned much more mixed, especially this past week, where weakness across energy, industrial metals, and grains has only been partly offset by gains across precious metals, where gold’s record-breaking run of gains continues.
Gold’s record-breaking rally continues, and following another shallow mid-month correction that saw buyers return ahead of USD 2,600, spot bullion broke above USD 2,700 to record its sixth record high this year. The precious metals market has witnessed an unprecedented strong uptrend this past year, with gold and silver both trading up more than 30% year-to-date, with only minor corrections seen during this extended rally, which at this point, shows little sign of ending.
The bullish drivers throughout this period are numerous, from the risk of fiscal instability and uncertainties surrounding the US presidential election to its safe-haven appeal, geopolitical tensions, and de-dollarisation. And now also rate cuts—not just by the Fed, but by other central banks as well—reducing the cost of holding non-interest-paying investments in gold and silver. The latter potentially supports increased demand for gold-backed ETFs from underinvested asset managers, especially in the West, who, up until May, had been net sellers since the FOMC began its aggressive rate hikes in 2022.
The sustained demand for investment metals during this time has, for now, triggered a breakdown in the normal inverse correlation between gold and the dollar. The latest example is the lack of a negative reaction in gold to the 2.5% gain in the Bloomberg Dollar Index since the beginning of September—a period that has seen the timing, speed, and depth of future US rate cuts pared back amid continued strength in US economic data.
Having already jumped by almost 40% in the past 12 months, there is little doubt that many would-be investors balk at the prospect of paying record prices, but the fear of missing out on the continued rally ultimately forces many to get involved. Having reached record prices, the ability to forecast the next level is increasingly down to guesswork and the round numbers game, with the next major target for gold pointing to USD 3,000 and silver to USD 35.
This week, a poll among delegates from around the world attending the London Bullion Market Association’s annual gathering predicted higher prices in a year’s time for gold, silver, platinum, and palladium. While gold is expected to climb around 10% to USD 2,917.40 an ounce by late October next year, delegates, just like us at Saxo, held a very strong view on silver, seeing it gain more than 40% to reach USD 45 an ounce, with experts noting that industrial demand continues to drive market deficits as mine supply struggles to keep pace.
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