The gold price rose 4.2% in October, despite the normally strong headwinds of rises in the US Dollar and Treasury yields
Geopolitics played a more prominent role in the month, with the Middle East conflict and US elections weighing on investors’ minds
Net inflows globally into gold exchange-traded products built on the positive flows in Q3 – the first positive quarter since Q1 2022
Further escalation in the conflict in the Middle East along with rising uncertainties around the US Presidential election fuelled the gold price in October, outweighing the negative impacts of a stronger US Dollar and higher Treasury bond yields. The precious metal once again set new records and ended the month at US$2,744 an ounce, an increase of 4.2% for the month and 33.0% since the start of the year. Gold has been one of the best-performing assets so far in 2024.
Data from the World Gold Council1 confirmed what we’ve highlighted for the past few months, that flows globally into gold-backed exchange-traded products (ETPs) have recently turned positive, with Q3’s net inflows being the first such quarter since Q1 2022. Overall demand for gold grew 5% compared to Q3 last year, and the 1,313 tonnes consumed was a record high for a third quarter.
The gold price was little changed in the first week of the month, marking one year since the Hamas attack on Israel. The price began strengthening on 10 October in response to the previous week’s US jobless claims (258,000 versus 230,000 expected) increasing the likelihood of a Fed rate cut in November. Intensification between Israel and Hezbollah continued to drive the price of the perceived “safe haven” asset higher, ultimately reaching a high of $2,788 on 30 October.
Gold gave back some gains on the final day of the month, at least partly in response to the rise in Treasury yields during the month. As a reminder, higher yields increase the opportunity cost of holding the non-interest-bearing gold asset.
Real yields rose by 36 basis points in the month, as inflation continued to cool (outside of shelter and certain other areas) and nominal yields moved higher. The yield on 10-year Treasuries reached 4.3% towards the end of the month, the highest level since late-July, while the 2-year Treasuries were yielding just shy of 4.2% as October drew to a close. Both maturities saw a 50 basis-point increase in yield from the beginning of the month.
The US Dollar strengthened in October, with the DXY Index up 3.2% for the month. Following recent weakness, the USD bounced back in response to stronger US economic data during the month coupled with weakness in competing currencies including the JPY and EUR.
Keep an eye on …
The clear-cut US election results remove some of the uncertainty premium that had been baked into the gold price, so it will now be worth watching for further details on any Trump policies that may impact gold-sensitive factors such as inflation, the US Dollar and the federal deficit. Fed Chair Powell said the rate-setting committee won’t be altering its monetary policy decisions based on the election result, so investors should continue focusing on the path of inflation and the employment market to assess the potential for more rate cuts. Also keep an eye on the situations in both the Middle East and Ukraine as Trump prepares to make good on his pledge to end the wars, and language coming out of China and potentially other exporting nations regarding tariffs.
For transparency, this outlook was written post the election results.
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1 Sources: Metals Focus, World Gold Council, data as at 30 September 2024.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Data as at 1 November 2024 unless otherwise stated. Source: Bloomberg.
This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. Views and opinions are based on current market conditions and are subject to change.
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