Gold hits new record over $2700 an ounce, extending gains early Monday, on haven demand driven by Mideast tensions. Silver also soared over $34 an ounce to hit its highest point since 2012.
Factors influencing global markets include the health of the U.S. and Chinese economies, the impact of the conflicts in the Middle East and the upcoming U.S. presidential election.
Investors are pricing in another interest rate cut from the Federal Reserve, which is seen as bullish for gold, as is the worsening tensions in the Middle East. China cut benchmark lending rates amid efforts to spur the economy. If former U.S. President Donald Trump is reelected in November, he has promised to raise tariffs on China, potentially affecting the country’s economy and markets. China is the world’s largest gold consumer.
Front-month gold futures rose 2% last week to settle at $2,730.00 an ounce on Comex after the most-active December contract increased 0.8% Friday. Bullion is up 2.7% so far this month after gaining 5.2% in September and advancing 2.2% in August. The metal rose 13% in 2023. The December contract is currently up $23.40 (+0.86%) a ounce to $2753.40 and the DG spot price is $2739.00.
The yellow metal’s rally last week was in tandem with the broader market. The S&P 500 Index hit its 47th record this calendar year on Friday. Investors have also been boosting their holdings in gold because of the uncertainty around the U.S. presidential election, currently seen as a tossup. Gold is a traditional hedge against uncertainty.
Gold, silver, palladium and platinum are all rising on the Middle East conflict. Israel is discussing increasing attacks on Iran after a Hezbollah drone exploded near Israeli Prime Minister Benjamin Netanyahu’s private home over the weekend. The country’s bombardment of Gaza and Lebanon also continued over the weekend.
The International Monetary Fund and World Bank finance ministers and central bank heads are scheduled to gather in Washington this week for their annual meeting. The global economic outlook, including the Middle East conflict, the Russia-Ukraine war and the neck-and-neck U.S. presidential election are all expected to be on the agenda.
Most investors tracked by the CME FedWatch Tool expect the Fed to cut rates again in November, with 92.2% anticipating a 25 basis point reduction. The rest are betting on the Fed holding rates steady. The central bank has two scheduled policy meetings left this year. Most investors tracked by the tool are expecting rates to end the year at 4.25% to 4.50% (currently at 4.75% to 5.00%).
The central bank cut interest rates by 50 basis points last month to 4.75% to 5.00%. It had kept them at 5.25% to 5.50% for a year after raising them by 5.25 percentage points since March 2022 to rein in inflation.
Front-month silver futures increased 4.7% last week to $33.23 an ounce on Comex after surging 4.6% Friday. Silver is up 5.7% in October after rallying 7.9% in September and gaining 0.7% in August. It ticked up 0.2% in 2023. The December contract is currently up $1.161 (+3.49%) an ounce to $34.395 and the DG spot price is $34.26.
Spot palladium was trading at $1,098.50 an ounce late Sunday, up 2.2% from a week earlier. Palladium gained 3.2% in September after increasing 3.2% in August and decreasing 4.3% in July. Palladium plummeted 38% last year. The current DG spot price is up $0.60 an ounce to $1092.50.
Spot platinum was trading at $1,026.30 an ounce late Sunday, up 3.6% from a week earlier. Platinum increased 5.6% last month after sliding 5.2% in August and losing 2.1% in July. Platinum dropped 6.8% in 2023. The DG spot price is currently up $9.50 an ounce to $1029.00.
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