The recent economic indicators from the United States show signs of resilience amid inflation concernsThe latest data revealed that for the week ending October 19th, the number of initial unemployment claims fell to 227,000, which was lower than the anticipated figure of 242,000 and slightly below the previous week’s total of 241,000. However, the number of people continuing to claim unemployment insurance rose to nearly 1.9 million, marking a three-year high.

Additionally, the October Markit PMIs for manufacturing, services, and the composite sectors all exhibited a recovery from September, reaching two-month highsFor the month of September, new home sales were reported at an annualized rate of 738,000 units, surpassing expectations of 720,000 and an increase from August’s revised figure of 716,000 unitsNew home sales also saw a month-over-month increase of 4.1%, exceeding the anticipated growth of 0.6%.

In terms of employment, September recorded an impressive addition of 254,000 non-farm jobs, far surpassing the expected increase of 140,000 and the previous figure of 159,000. The unemployment rate also fell to 4.1%, down from expectations of 4.2% and the prior month’s rate.

Inflation data further complicates the narrative with the core Consumer Price Index (CPI) in September showing a year-over-year value of 3.3%, exceeding projections and the prior month’s figure of 3.2%. On a month-to-month basis, the figure was 0.3%, higher than the expected 0.2%. American retail sales also exceeded expectations, showing a month-over-month growth of 0.4%, compared to an anticipated 0.3% and an increase of just 0.1% in the previous month.

In light of the Federal Reserve’s tight monetary policy stance amid the robust economic data, predictions for significant interest rate cuts have cooled

Advertisements

Surprisingly, the narrowing of the rate-cut pathway has not deterred gold prices from climbingThe price of gold reached its 34th all-time high of the year on COMEX, breaking through the $1,763.10 per ounce thresholdFollowing the 23rd, gold prices fluctuated at these high levels, reflecting increased volatility in the short termBy the market close on the 25th, gold had seen notable declines over a three-day period.

Analysts contend that the recent pullback in gold prices can be attributed largely to a rising U.Sdollar index, coupled with a lack of macroeconomic stimuli for safe-haven demand for goldAs market participants opted to secure profits, technical indicators suggest that gold remains in an upward trendHowever, persistent geopolitical uncertainties may increase the volatility of gold prices at these elevated levels.

The dynamics surrounding gold price movements appear to have shifted since late September, where traditional relationships—specifically between real interest rates on U.S

Advertisements

bonds and gold prices—have become less effectiveNotably, gold and the dollar have both experienced gains, suggesting a shift in investor focusThe prevailing discourse surrounding U.Sfiscal and inflationary policies has emerged as a key driver for gold’s price ascent.

Particularly revealing is the fiscal approach advocated by the presumptive U.Spresident, promoting a combination of tax cuts and tariffs that would likely boost economic growth, increase national debt, and elevate inflation expectationsConsequently, the market has begun to price in a renewed inflation backdrop, providing additional support for gold prices.

Gold is uniquely versatile, functioning as a currency, a commodity, and a financial assetIt is revered not only for its potential as a hedge against inflation but also for its protective qualities during times of crisisThe interplay of concerns regarding the Federal Reserve’s easing policies, ongoing geopolitical tensions, and the corresponding safe-haven demand has driven renewed interest in both gold and the U.S

Advertisements

dollar.

An analysis from OCBC Bank notes considerable divergences in recent polling outcomes, prompting strategies to hedge against potential risks surrounding the upcoming presidential election, which increases the appeal of gold as a safeguarding asset.

Moreover, several additional factors are acting as catalysts for higher gold pricesChief among these is the cascade of interest rate cuts initiated by the Federal Reserve, which has triggered a global tendency toward easing monetary policiesFollowing the Federal Reserve's decisive rate cut of 50 basis points on September 18, central banks in Europe, Canada, Indonesia, South Africa, Saudi Arabia, Kuwait, Bahrain, the UAE, Qatar, and New Zealand swiftly followed suit.

As October rolled in, the Bank of Korea announced its decision to cut the benchmark rate by 25 basis points to 3.25%. The European Central Bank also lowered three key rates by 25 basis points, representing its third rate cut this year

Similarly, the Bank of Canada announced a reduction of 50 basis points, declining its rate from 4.25% to 3.75%, marking its fourth cutIn China, the central bank executed a 20 basis point cut to the reverse repo rate, alongside reductions in the looser policy rate (LPR) and deposit rates.

Furthermore, there has been sustained demand for gold purchasesFor instance, in September, North American ETFs recorded inflows for the third consecutive month, marking a notable expansion in asset management size within the regionThe net inflows have recovered from negative territory to positive for gold ETFs globally, attributable primarily to market anticipations of future interest rate cuts and a more accommodative policy stance.

Many central banks globally are also amplifying their gold purchasesData from the World Gold Council indicates that the net volume of gold purchases by central banks increased by 6% year-on-year to 184 tons in Q2 2024, highlighting the robustness of demand among national reserves

alefox

Notably, Azerbaijan's State Oil Fund reported a total gold inventory of 114.9 tons at the end of Q2, an increase of 13 tons since the end of the previous year—signifying one of the largest quarterly jumps since Q2 2019.

Additionally, at the recent London Bullion Market Association annual conference in Miami, representatives from central banks in multiple countries such as Mexico, Mongolia, and the Czech Republic notably expressed support for augmenting their gold reserves.

Looking ahead, the trajectory of gold prices appears poised to remain closely tied to prevailing safe-haven sentimentsThe overarching landscape of global economic growth dynamics and the restructuring of supply chains, combined with persistent inflation pressures, are likely to exert a lasting influence on gold pricing structures.

For investors eyeing the gold market, there are several considerations

For those optimistic about future gold price increases, a reduction in fees announced by Huaxia Fund on October 17 could be strategically advantageousFrom this date forward, the management fee rate for Huaxia’s Gold ETF (518850) has decreased from 0.5% to 0.15%, while the custodian fee dropped from 0.1% to 0.05%. These adjustments position Huaxia’s Gold ETF at the current lowest fee level among similar products in the market, presenting an attractive opportunity for investors to enter the gold market with reduced costs.

The Huaxia Gold ETF (518850), which mirrors gold price movements, operates on a T+0 basis, catering to investors seeking asset allocation solutionsThis structure allows gold to serve as a foundational asset class, with one share representing 1 gram of physical gold, thus minimizing investment barriers and storage concernsInvestors without a trading account may consider the off-exchange gold ETF-linked fund (008702), which waives redemption fees after a holding period of seven days.

Investors who are more interested in capitalizing on equities within the gold supply chain should focus on companies that are projected to yield attractive profits