In October, Comex gold (December) surged by 3.4%, extending its winning streak to four consecutive months and reaching a record high of $2,801.80 per ounce. Meanwhile, in India, MCX gold hit an all-time high of Rs 79,775 per 10 grams, marking its third straight month of gains.
This rally in gold has been driven by optimism surrounding potential rate cuts, steady central bank buying, and strong demand from Asia. More recently, heightened geopolitical risks and uncertainty leading up to the tight US election have propelled gold to new record highs.
However, after reaching these peaks, gold has faced headwinds from a stronger US dollar, though downside has been capped as traders continue to view gold as a safe-haven asset amid lingering geopolitical risks, despite US efforts toward a ceasefire in Lebanon.
Gold started October on a weaker note as a healthy US labour market suggested the Fed might hold off on a substantial rate cut. Prices witnessed further pressure as China’s limited fiscal stimulus disappointed markets, weighing on demand outlook from the world’s largest gold consumer. However, prices rebounded from the second week onwards, rising from a monthly low of $2,618 per ounce, supported by softer-than-expected US producer price data and a rise in unemployment claims.
The weaker dollar, combined with dovish stances from central banks, further bolstered gold’s appeal. Escalating geopolitical tensions in the Middle East and uncertainty around the US election also increased safe-haven demand, propelling prices nearly 7%, or $182, to new all-time highs.
Gold is currently trading in a narrow range as dollar surged above 105 following early exit polls that suggest Republican candidate Donald Trump holds an edge in the highly contested US presidential race. However, the close contest between Trump and Democrat Kamala Harris implies that the final result may take several days to be determined, with this uncertainty likely boosting demand for the precious metal.
Beyond the US election, elevated geopolitical risks would play a key role in gold’s upside. As per latest World Gold Council report, Gold-backed ETFs, a key demand indicator, saw inflows rise by 18 tonnes in September, totaling 3,200 tonnes while Q3 2024 over-the-counter (OTC) gold investments nearly doubled year-on-year, and supply grew 5%, driven by higher mine production and increased recycled volumes.
Additionally, the BRICS summit revealed initiatives to establish a “BRICS Bridge” payment system, aimed at reducing global reliance on the US dollar, potentially bullish for gold long-term. The Federal Reserve’s upcoming decisions, including the widely expected 25 basis-point rate cut in its November meeting, along with key US economic data, will be closely watched as indicators of economic health and future monetary policy direction. These factors will collectively influence gold prices as investors assess safe-haven assets amid economic uncertainty and growing de-dollarization efforts.
Silver prices rallied in October, reaching a 12-year high of over $35 per ounce primarily driven by safe-haven demand, expectations of Chinese stimulus, geopolitical tensions, and a concurrent rise in gold prices. However, a strengthening US dollar and rising Treasury yields led to a 6.5% correction from the highs, limiting gains in October to 4%. While potential Chinese stimulus measures may renew a rally in prices, Silver’s heavy reliance on the same means that prices could face a significant downside if Beijing fails to deliver on the widely anticipated fiscal package.