Gold was up $51 to $2422- just a few dollars short of reaching its life time high of 2450.134$ that it attained in May 2024. Not this week, but it seems the platform to attain its peak has already been laid and the yellow metal is soon expected to cross that mark in the coming few weeks.
Prithviraj Kothari says “Gold and silver prices were solidly higher in midday U.S. trading Thursday, with gold hitting a six-week peak and silver a five-week high, in the aftermath of another tame U.S. inflation report that suggests the Federal Reserve will lower interest rates soon.”
The run in gold prices this year has been very impressive, though we cannot be precise about thecause, but the fact that neither – The U.S. Presidential Election is only four months away, and while geopolitical uncertainty is supporting a safe-haven bid in gold, this could be just the start of a broader rally for the precious metal
U.S Data – Gold edged higher for a third day as traders look ahead to the release of key US inflation figures later on Thursday.
US CPI report weakened US Dollar and supported gold as US interest expectations showed higher confidence in September and November cuts, suggesting even 25% chance of 3 cuts this year. As for now, gold futures gain almost 1.9%, rising to the highest level since 20 May.
US Super core CPI (non-housing services inflation) dropped by -0.154% on monthly basis, first time since 2021 (but is still higher to 4.6% on a yearly basis). Markets may now see higher chances that a further drop in inflation will end in the recession, as June services ISM data and NFP report were quite weak. In the effect we can see higher volumes and rally on gold market today.
Central Bank Buying – Demand for gold remains strong, with central banks continuing to purchase gold driven by a longstanding strategy of USD diversification. Central banks such as China, Russia and India possess gold holdings at 1-3% of foreign exchange reserves, well below European central banks at over 10%, a level PBoC has in the past repeatedly noted it sees as more ideal. Gold slumped this week on data showing the PBoC wasn’t buying but they expect that to reverse. One of the main drivers of this rally has been gold buying by the central bank.
U.S. Presidential Elections – A Trump presidency would be particularly bullish for gold due to policies favouring higher deficits, tariffs, and potential pressure on Federal Reserve independence. Simply extending the maturing tax cuts would add US$3 trillion to the deficit over the next ten years.
While a second term for Biden is also seen as positive for gold, Trump’s approach could create a more inflationary environment, further boosting bullion prices.
As per bullion king of India “Gold prices have performed remarkably in the first half of 2024. it does seem the Federal Reserve (and to some extent all central banks) are more comfortable with higher structural inflation. All this is to say we believe a Biden second term should not be a negative for gold prices, but if Trump is re-elected and he follows through on his policy positions, gold could have another run.”
Summing it up, majority of the players in the market believe that gold is set for another run given the amount of news and volatility that awaits in the coming weeks.
Demand, US Politics, US Data, Geopolitical tensions are some the key events that will continue to influence the yellow metal.
