July and August 2024 witnessed strong gains for gold, with September continuing this trend. Indeed, by the end of September, the month had seen an increase in the gold price of 4.6% to USD2,630 per oz, and witnessed eight new highs, the last one of which was seen on 26th September. However, data released shows a very marginal decline as the month drifted towards its end date.
Gold analysts suggest that the price of gold was pushed higher due to the Federal Reserve’s FOMC (Federal Open Market Committee) dropping interest rates by a somewhat surprising 50 basis points. Analysts suggest another important factor regarding the gains in gold are the increasing geopolitical tensions that are being witnessed, especially in the Middle East and the Russian/Ukrainian war.
On the *ETF (Exchange Traded Funds) front, Global Physically Backed Gold Exchange-Traded Funds witnessed, according to data released, a fifth consecutive month of in-flows. These were recorded at 18.4 metric tons, equivalent to USD1.4 Billion. Data released revealed collective holdings now stand at 3,200 tons, with recent in-flows pushing assets under management to USD270.9 Billion as of close of business 30th September 2024.
*ETFs or Exchange Traded Funds – These are a type of investment fund, but it is also an exchange-traded product which means it is traded on a stock exchange. ETFs buy into and own financial assets such as currencies, bonds, stocks, and commodities such as gold bars. In the case of Physical Gold ETFs they invest directly into gold bullion usually held in a vault. The value of Gold ETFs moves correspondingly with the spot price of gold.
Estimates released by expert analysts showed that in September, global trading volumes rose by 7% month on month to USD259 Million per day, whilst in the OTC* market trading volumes added 10% to USD176 Billion. This year, the gold price has risen 28%, with the Federal Reserve suggesting that there are more interest rate cuts to come. On COMEX**, speculators were seen to increase their total net long position by 6% or 976 tons from August to 30th September, with data showing this to be the highest level since February 2020.
*OTC Market – OTC or Over-The -Counter trading is the process of trading commodities such as gold, stocks, bond, and derivatives without the oversight of a central exchange. OTC trading is different from exchanged based trading where transactions take place on a centralised exchange such as the London Stock Exchange, the Nasdaq, or New Yor Stock Exchange. OTC trading takes place between a network of participants such as brokers banks, and other financial institutions that trade directly (not via an exchange) with each other.
**COMEX – This is the abbreviation for The Commodity Exchange and is the world’s largest options and futures market, where metals such as gold, silver, copper, and aluminium are traded. COMEX is a division of the Chicago Mercantile Exchange Group.
Elsewhere, official data showed that China’s central bank, the PBOC (The People’s Bank of China), refrained for the fifth month in succession in buying gold to increase their reserves, with officials indicating the reason is due to the surge in gold prices. Experts suggest that pauses in new purchases of gold by the PBOC is that they are waiting for a more attractive entry point. On a global basis, central banks were actively buying gold from 2022 – 2023, but data shows they are currently on-track to reduce purchases in 2024.
Experts suggest that with US interest rates due to fall, and the likelihood of continuing global geopolitical pressures, especially those emanating from the Middle East, gold will continue to climb, and perhaps the PBOC would be better off buying now rather than later. With analysts and experts alike currently forecasting gold to rise to in excess of USD3000 per ounce in 2025, investors across the gold markets may well continue to buy, pushing the price even higher.
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