Driven by the interest rate cut cycle and the escalating situation in the Middle East, international gold prices continue to rise!
On September 20th, spot gold prices broke through $2600 for the first time, setting a new historical record. London spot gold surged 1.37% to $2621.5286 per ounce; COMEX gold futures rose 1.03%, closing at $2647.1 per ounce.
With the continuous surge in gold prices, domestic gold jewelry prices have also risen significantly. On September 21st, the prices of gold jewelry from several gold shops such as Chow Tai Fook and Lao Feng Xiang reached a high of 767 yuan/gram.
It is worth noting that last week, long positions in gold futures surged, and the world's largest gold ETF holdings also reached a new high since the beginning of the year, indicating a strong bullish sentiment towards gold in the current market. However, physical gold consumption remains weak.
Spot gold exceeds $2600
Since the beginning of this year, gold has been almost unstoppable, with London spot gold soaring from the $2000 level at the beginning of the year, fluctuating and consolidating at the $2400 level, and breaking through the $2500 level in mid August.
On the early morning of September 19th, the Federal Reserve announced a 50 basis point interest rate cut for September, lowering the benchmark rate to 4.75% -5.00%, officially beginning the current round of interest rate cuts. The Federal Reserve has activated positive expectations of easing, which has increased the attractiveness of gold that does not pay interest.
On September 20th, spot gold prices broke through $2600 for the first time, setting a new historical record. As of the close, London spot gold rose 1.37% to $2621.5286 per ounce. COMEX gold futures rose 1.03%, closing at $2647.1 per ounce.
Since the beginning of this year, the price increase of London spot gold has reached 27.12%, surpassing the 25.10% increase in 2020. If maintained until the end of the year, it will set the largest annual increase in nearly 14 years.
Analysts from Forex.com stated in a report that "ongoing geopolitical risks such as conflicts in Gaza, Ukraine, and other regions will ensure the maintenance of safe haven demand for gold." Meanwhile, the continued weakness of the US dollar has made gold cheaper for holders of other currencies, providing additional benefits for gold.
In a report, analysts from Deutsche Bank stated that although the Federal Reserve emphasized that a significant 50 basis point rate cut is the exception rather than the norm, the market does not seem convinced, increasing investors' interest in interest free gold. Deutsche Bank stated that traders expect a 75 basis point interest rate cut by the end of the year, and as long as these expectations persist, the rise in gold prices should continue.
The price of gold jewelry has skyrocketed
The sustained surge in gold prices has also pushed up domestic gold jewelry prices. According to data from Golden Ten, on September 21st, the price of gold jewelry in multiple gold stores such as Chow Tai Fook and Lao Feng Xiang reached a high of 767 yuan/gram.
However, physical gold consumption remains weak. The World Gold Council announced that the gold outflow from the Shanghai Gold Exchange in August was 102 tons, an increase of 17% month on month, but a year-on-year decrease of 37%. Despite seasonal factors (such as the approaching major events in the industry and the upcoming peak sales season in early October) driving a month on month increase in gold outflows, the weakness in gold consumption continues to suppress upstream physical gold demand.
Fangzheng Securities stated in a research report that the Mid Autumn Festival consumption performance was stable. According to feedback from some dealers, the end market met expectations but did not show a significant turning point. Some stores increased their discount efforts to over 100 yuan per gram. Against the backdrop of sustained upward trend in gold prices, gold jewelry is expected to continue to be favored by consumers.
Long positions surge, gold speculation trading crowded?
Against the backdrop of continuously hitting new highs in gold prices, many investors continue to be bullish on gold and increase their positions to bet on further increases in gold prices.
According to data from the US Commodity Futures Trading Commission (CFTC), COMEX gold speculators increased their net long position by 25900 lots to 252600 lots during the week of September 17th. This indicates that against the backdrop of increasing market uncertainty, investors' demand for safe haven gold has increased.
In addition, COMEX silver speculators increased their net long position by 15200 lots to 42300 lots.
According to Wei Jianrong, a metalworking analyst at Open Source Securities, based on the COMEX gold futures holdings released by the CFTC, the net long positions of managed funds representing speculative demand have experienced a significant upward trend since October 2023 and have now reached their highest level since 2020, with speculative trading being quite crowded.
On September 13, 2024, there were too few arbitrage traders in the managed fund category, indicating crowding and giving a bearish signal; Under the category of exchange traders, the number of long positions is relatively small and the average position is light, giving short and long signals respectively; The recommended storage space for COT signals is -33.3%.
Guangfa Securities pointed out in a research report that the Fed's initial 50 basis point drop is considered a "big opening" and actually implies a "recession rate cut". The short-term impact on the market is not small. The upward attempt of gold prices and the subsequent drop also indicate that the pressure to cash in profits after the "boot landing" is being released. There is considerable pressure for a significant increase in short-term gold prices, and it is necessary to pay attention to and handle the resistance zone between $2600 and $2650 with caution at the trading level. However, short-term trading disturbances have not shaken the underlying logic of this gold bull market. The substitution of the US dollar and the "currency anchor" remain the long-term driving forces for the gradual rise of gold prices.
It is worth noting that as an important barometer of the global gold market, the holdings of SPDR Gold Trust, the world's largest gold ETF, increased by 1.43 tons compared to the previous day, and the current total holdings are 875.39 tons, reaching a new high since January 2 this year. The increase in SPDR Gold Trust holdings reflects the rising demand for gold in the market.
Although the holdings of SPDR Gold Trust have reached a new high for the year, there is still a significant decrease compared to the 2020 high of 1270 tons. The current cumulative net inflow is at a low level since 2020, which also means that there is still a lot of potential capital inflow space for gold ETFs.