Precious Metals in Turmoil
(I) Weekly Perspective
This year, gold has undoubtedly been one of the best-performing assets, with its price soaring rapidly amidst multiple event disturbances. The strong performance of gold has been driven by traditional factors such as the prospect of Federal Reserve rate cuts, escalating geopolitical risks, and safe-haven sentiment, as well as the marginal forces of inflation hedging and global central bank gold purchases. Especially with the significant rate cuts by the Federal Reserve, and of course, the uncertainties surrounding the U.S. presidential election in the fourth quarter have now been resolved. The gold market's trajectory is primarily influenced by U.S. economic data, geopolitical tensions, and market expectations for Federal Reserve rate cuts. Against the backdrop of a complex and volatile global macroeconomic environment, gold's safe-haven attributes have once again come to the fore.
There is still much uncertainty in the market for the fourth quarter of this year. The pace and magnitude of Federal Reserve rate cuts, geopolitical issues, and the changes in market sentiment caused by the global rise in risk assets driven by domestic policy "combination punches" will all impact the fluctuations in gold prices. Surveys show that, due to the favorable U.S. interest rate environment and ongoing geopolitical tensions, the upward momentum of gold prices will continue into 2025. Moreover, as geopolitical tensions escalate and market uncertainties persist, investors are flocking to gold ETFs.
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In the week just passed, international gold prices stopped falling and rebounded sharply, surging by more than one hundred and fifty dollars. The rise in gold prices benefited from the superimposition of multiple factors, including escalating situations, a stronger dollar, and uncertainty about the Federal Reserve's policy prospects. Recently, the intensification of the situation has injected a strong safe-haven momentum into the gold market. Geopolitical risks continue to drive safe-haven funds into the gold market, prompting investors to seek refuge in gold. Although the U.S. dollar index is also boosted by safe-haven sentiment, gold prices still rise steadily, showing that it remains attractive as the "ultimate safe-haven asset."
Looking ahead, the main theme of the gold market will still be the dual impact of geopolitical situations and monetary policy. Next week, the core driving force of the market may still come from the combined effects of economic data, central bank dynamics, and geopolitical factors. In addition to focusing on geopolitical situations, attention should also be paid to the impact of U.S. housing data, GDP, and durable goods orders on Federal Reserve rate cut expectations.
Furthermore, market expectations for a Federal Reserve rate cut in December are diminishing. Although inflation has fallen back, continued economic growth and potential fiscal expansion may lead the Fed to choose to delay easing policy, which further drives the strong performance of the dollar.
Therefore, for the precious metals market outlook, Xiao Chu believes that the probability of short-term gold fluctuations is relatively high, and it is better to sell high! Personal opinion, for reference only!
(II) Market Review
Last week, international gold prices stopped falling and rebounded sharply. The opening price of the week was $2,571.5 per ounce, with the highest price of $2,718.5 per ounce, the lowest price of $2,568.5 per ounce, and the closing price of $2,718.2 per ounce, up $150.8, an increase of 5.87%, the largest weekly increase in recent years.
On Monday, gold and silver plummeted significantly, with the main trend being a pullback after reaching highs.
(III) Fundamental Dynamics
(1) Weekly News:
On Monday, gold futures rose nearly 2%, ending a six-day losing streak, as the dollar fell and tensions escalated, once again attracting safe-haven funds into the precious metals market.
Goldman Sachs Group stated that influenced by central bank purchases and U.S. rate cuts, gold will rise to a record level next year. Goldman Sachs lists gold as one of the hottest commodity trades for 2025.
Goldman Sachs analysts believe that governments may also provide a boost to gold prices. If trade tensions escalate to an unprecedented level, it may attract speculative funds to enter the market and go long on gold. In addition, increased concerns about the sustainability of U.S. fiscal policy may also boost gold prices, with central banks—especially those holding large reserves of U.S. Treasury bonds—potentially choosing to buy more gold.
On Tuesday, gold futures rose for a second consecutive day, reaching a one-week high, as escalating tensions prompted investors to scramble for safe-haven assets, while investors awaited key signals on the Federal Reserve's interest rate plans.
According to UBS Group's forecast, gold will rise to $2,900 per ounce by the end of next year, consistent with Goldman Sachs Group's prediction that gold will continue to rise as central banks expand their gold reserves.
On Wednesday, gold futures on the Chicago Mercantile Exchange (COMEX) rose for a third consecutive trading day, reaching a new high in over a week.
On Thursday, gold futures rose for a fourth consecutive trading day, reaching a new high in over a week; as poor revenue forecasts from AI leader Nvidia, coupled with escalating Russia-Ukraine tensions, boosted the surge in safe-haven demand.
Escalating geopolitical tensions often prompt investors to turn to safe-haven assets such as gold.
As conflicts escalate, gold futures rose for a fifth consecutive trading day on Friday, breaking through the $2,700 mark for the first time in two weeks, marking the largest weekly increase in nearly two years, as safe-haven demand offset the impact of a stronger dollar and diminished expectations for a rate cut by the U.S. in the coming month.
(2) Gold ETFs and US Dollar Index
[Gold ETF Holdings] As of November 21, it increased by 2.58 tons compared to the previous day, with current holdings at 877.97 tons.
We know that the dollar and gold, as global safe-haven instruments, have a strong substitutive relationship. In the medium to long term, they exhibit a negative correlation. Since gold is priced in dollars, a strong US Dollar Index makes gold more expensive for overseas investors, and a rising dollar also diminishes the appeal of gold to buyers holding other currencies.
In the past week, the US Dollar Index continued to rise, reaching a new high in nearly two years. The opening price for the week was 106.66, with a high of 108.09, a low of 106.07, and it closed at 107.48 for the week, up 0.76%.