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What drives the gold market and how investors buy it?
Investors seeking to protect themselves from the increasing economic and geopolitical uncertainties, as well as expectations of future interest rate reductions by the U.S. Federal Reserve, drove gold prices above $4,000 per ounce on Wednesday. Bullion has increased 52% in value this year. This is due to a number of factors, including central bank purchases, monetary policy ease, and a weaker US dollar. You can invest in gold using different methods: SPOT MARKET Big banks are usually the gold buyers for large investors and institutional buyers. The spot market is determined by the real-time dynamics of supply and demand. London has the largest influence on the spot gold markets, thanks to the London Bullion Market Association. The association establishes standards for gold trading, provides a framework for over-the counter trade, and facilitates transactions between banks, dealers and institutions. China, India, Middle East, and the United States, are also major gold trading centers. Futures Market Futures exchanges are another way for investors to get exposed to gold. They allow them buy or sell commodities at a set price, on a specific date in the future. COMEX, part of the New York Mercantile Exchange (NYMEX), is the world's largest gold futures exchange in terms of volume of trading. Shanghai Futures Exchange (China's largest commodities exchange) also offers gold contracts. TOCOM (the Tokyo Commodity Exchange) is another major player on the Asian gold market. EXCHANGE TRADED PRODUCTS Exchange-traded product or exchange-traded fund issue securities backed with physical metal, allowing people to gain exposure without having to take delivery of the metal themselves. Exchange-traded fund demand has become the largest category for precious metal investment. According to World Gold Council data, the amount of money invested in gold-backed exchange-traded fund has reached $64 billion this year. September saw a record-breaking $17.3 billion. BARRES AND COINS Metals traders can sell bars and coins to retail consumers in shops or online. Both gold bars and coins can be used to invest in physical gold. DRIVERS: Investor Interest and Market Sentiment The price of bullion has been affected by the rising interest in investment funds over recent years. Sentiment fueled by news, global events, and market trends can drive speculative gold buying or selling. FOREIGN RATES OF EXCHANGE Gold is an excellent hedge against volatility in the currency markets. Gold has historically moved in the opposite direction of the U.S. Dollar, as a weaker dollar makes gold priced in dollars cheaper for holders other currencies. MONETARY POLICY & POLITICAL TENSION Precious metals are widely regarded as a safe haven in times of uncertainty. U.S. President Donald Trump’s trade tariffs, and his imposition on additional duties on Chinese products have sparked an international trade war. This has rattled currency markets and sparked fears of an increase in U.S. Inflation. Trade war escalates, with Trump increasing tariffs against Chinese imports up to 145%. China raised tariffs from 84% to 125% on U.S. products. Gold's direction is also affected by the policy decisions made by global central banks. Gold is less expensive to hold when interest rates are lower, since it does not pay interest. CENTRAL BANK GLOBAL GOLD RESERVES Gold is held by central banks as reserves. The demand for central bank gold has been high in recent years due to macroeconomic and political uncertainties. In its annual survey, conducted by the World Gold Council in June, it was revealed that more central banks intend to increase their gold reserves in the next year despite the high price of the metal. The World Gold Council reported that global gold demand including over-the counter trading rose by 1% in 2024 to a new record high. Central banks also increased their buying in the last quarter. The People's Bank of China reported on Tuesday that China's gold reserves totaled 74.06 fine troy-ounces as of the end of September. This is up from 74.02 in the preceding month.
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Gold continues historic rally and soars above $4,000/oz.
Investors seeking to protect themselves from the increasing economic and geopolitical uncertainties, as well as expectations of future interest rate reductions by the U.S. Federal Reserve, drove gold prices above $4,000 per ounce on Wednesday. By 0213 GMT, spot gold had risen 0.5% to $4,002.53 an ounce. U.S. Gold Futures for December Delivery gained 0.5% at $4,025 an ounce. Gold is traditionally seen as an investment during periods of uncertainty. Gold spot is up 52 percent year-to date after rising 27 percent in 2024. The Fed is likely to continue lowering rates, so the market will be looking for the next round number of 5,000. There will be bumps along the way, such as a lasting ceasefire in the Middle East or Ukraine, but the fundamental drivers for the trade, massive debt and increasing reserves, diversification of reserve assets, and a lower dollar, are unlikely to alter in the medium-term. A cocktail of factors has driven the metal's rally, including expectations for interest rate reductions, political and economic uncertainties, central bank purchases, and inflows to gold exchange-traded fund. Tuesday marked the seventh day of the U.S. Government shutdown. The shutdown has delayed the release of important economic indicators. This forces investors to rely upon secondary, nongovernment data in order to determine the timing and magnitude of Fed rate reductions. Investors now expect a 25 basis-point reduction at the Fed's meeting in this month. An additional 25 bp is expected in December. The political turmoil in France, Japan and other countries has also increased demand for safe-haven gold. Analysts say that a "fear of losing out" also drives the rally. "What we are seeing is that investors continue to buy gold despite its high price, which is amplifying this move even further," said UBS Analyst Giovanni Staunovo. Silver spot rose by 0.5%, to $48.03. Platinum gained 2.2%, to $1653.21, and palladium increased 1.3%, to $1355.32. (Reporting and editing by Sriraj Kalluvila, Christian Schmollinger and Anmol Choubey in Bengaluru)
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Gold cracks $4,000, stocks ease, yen wobbles due to political concerns
Investors were weighed down by the political fallout in France and Japan. Meanwhile, a prolonged U.S. shutdown pushed gold spot prices up to a record level of $4,000 an ounce. The Japanese yen was hovering near its eight-month-low as investors awaited the fiscal policy direction of prime minister-in waiting Sanae Takaichi. Meanwhile, the euro was under stress after French Prime Minister Sebastien lecornu's resignation on Monday. The dollar was a bit more optimistic. The dollar index (which measures the U.S. money against six other currencies) hit its highest level in August. However, sentiment was still gloomy as the shutdown entered its eighth day. MSCI's broadest Asia-Pacific share index outside Japan, which measures the performance of all Asia-Pacific stocks, fell by 1% on Wednesday, slipping away from its 4-1/2-year high. China and South Korea were closed during the long holiday. Nikkei 225 rose by 0.35% in Japan, but fell short of the record high reached the previous session. After a surprising victory for fiscal dove Takaichi over the weekend, traders quickly cut their bets against another hike in the Japanese market this year. Carol Kong, currency analyst at Commonwealth Bank of Australia said that Takaichi's win in the leadership race of the ruling Liberal Democratic Party has changed the risk balance to a rate hike later in 2026. Kong said that option traders have become less bearish about the dollar/yen than they were in September 2022, but she still believes the dollar will continue to fall against the yen over the short term. The yen fell to 152.33 dollars per yen, its lowest rate since mid-February. The yen has fallen over 3% in the past week and is on track to have its steepest weekly drop since last year. This raises concerns about possible intervention by Japanese authorities. The euro dropped 0.26%, to $1.1628. It was at its lowest level for a month. Markets were bracing themselves for more political turmoil in France. France's president Emmanuel Macron was under increasing pressure to resign, or to hold a snap parliamentary elections to end the political chaos which has seen five prime ministers resign in less than two year. The New Zealand dollar fell nearly 1% following the central bank's 50 basis point cut to its benchmark rate and the fact that it left the door open for more easing. This suggests policymakers are worried about the fragile state of the economy. All three U.S. indices finished in the negative after a New York Federal Reserve survey showed that consumer expectations were deteriorating and inflation projections were rising. Investors have relied on independent secondary data and remarks by monetary policymakers to determine the likelihood that the Federal Reserve would implement its second rate reduction of the year during this month's meeting. Traders have priced in 45 basis point of easing for this year. Gold prices have risen due to the prospect of rate cuts in the near future and demand for safe-haven assets. Gold prices rose to $4,000.96 an ounce on Tuesday, extending their gains for the past year above 50%. Thierry Wizman is a global FX & Rates Strategist at Macquarie Group. He said that gold's rally was a collective "hedge" to the potential failure of the U.S. AI-driven tech bubble. "A collapse in that optimistic 'vision,' could trigger an inflationary solution for the world's overhang of sovereign debt rather than a product-based solution." (Editing by Sam Holmes).
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Sources say that RPT-Traders are seeking yuan payments from Indian state buyers who purchase Russian oil.
Sources in the trade said that traders offering Russian oil are now asking Indian refiners to make payments in Chinese Yuan. They see recent signs of improved relations between New Delhi, China and Beijing as an opportunity to simplify transactions with Indian buyers. Indian Oil Corp, India's largest refiner and state-controlled company, paid in Chinese currency recently for two or three cargoes worth of Russian oil. Indian Oil has not responded to the request for comment immediately. Western sanctions against Russia following its invasion of Ukraine in 2022 have led to a greater use of alternative currencies such as the yuan or the dirham of the UAE for oil trades that were previously dominated by dollars. Indian state refiners paid for Russian oil using yuan in 2023. However, they stopped doing so due to the Indian government's displeasure during a time of increased tensions with Beijing. Private refiners, however, continued to use Chinese currency. One trader stated that traders who previously had to convert payments from dirhams and dollars to yuans - because only these can be directly converted into roubles to pay producers - now want to eliminate this costly step. Sources said traders also priced Russian oil in US dollars to ensure compliance with the European Union price cap, and sought payment equivalent to yuan. Due to sanctions, the West has stopped importing Russian oil. The sources stated that payments in yuan would increase the availability of Russian crude oil for Indian refiners as some traders refused to accept other currencies. After a break of over five years, India and China resumed direct flights. Last month, Indian Prime Minister Narendra Modi travelled to China for the first time since 2007. He was there to attend the Shanghai Cooperation Organisation's regional security bloc.
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US Sues Southern California Edison for Saddleridge Wildfire
The U.S. Government sued Southern California Edison for helping restore National Forest System land burned in the Saddleridge Wildfire near Los Angeles, in 2019. The lawsuit filed on Tuesday seeks damages to cover fire suppression and rehabilitation costs arising from Edison International's alleged negligence and trespassing by fire, as well as violations of California's public safety laws. Southern California Edison's spokesperson Gabriela Ornelas stated in a press release that the utility will review the complaint and respond via the legal process. The utility expressed its sympathy to the victims of fires. According to the Department of Justice, the Saddleridge Fire began at the base of an transmission tower near Sylmar in California during high winds after a powerline attached to another tower nearby fell on a steel arm, causing an electrical fault. According to a complaint filed at the Los Angeles federal courts, the fire on October 10, 2019, burned approximately 800 acres (324 ha) in the Angeles National Forest. It also damaged neighboring communities, and caused one death. Cal Fire reported that the Saddleridge Fire had burned 8,799 hectares (3,561 acres) in total. The government claimed that Southern California Edison was "aware of the potential dangers posed by high wind" and had failed to maintain its transmission lines, power lines, and other equipment. The government filed the lawsuit five weeks after it sued Southern California Edison for blaming their equipment for igniting the Eaton Fire and Fairview Fire of September 2022. The January wildfires, which included the Palisades Fire and Eaton Fire in Southern California, caused 31 deaths and damaged or destroyed more than 16,000 buildings. U.S. v. Southern California Edison Co et al. U.S. District Court Central District of California No. 25-09547. Reporting by Jonathan Stempel, New York; editing by Matthew Lewis
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Gold futures reach $4,000/oz; S&P 500 closes lower than recent records
The major stock indexes declined on Tuesday. The S&P 500 ended lower after recent records highs. Investors were looking at political turmoil in France, Japan, and the U.S. shutdown. Gold futures also hit $4,000 per ounce for the very first time. The demand for gold as a safe haven has been driven by the uncertainty surrounding the U.S. shutdown and expectations of another U.S. rate cut. U.S. Gold futures for delivery in December settled at $4,004.4. This is a 0.7% increase. It is the seventh day of the shutdown. The euro dropped against the U.S. Dollar for the second day, as investors awaited the developments in France. On Monday, the shocking resignation of Sebastien lecornu raised concerns over the fiscal outlook of the country. Tesla shares weighed on the S&P 500 & Nasdaq on Tuesday after the company announced more affordable versions its best-selling Model Y & Model 3 SUVs and sedans. The electric-vehicle manufacturer is trying to reverse declining sales and waning share of the market. Consumer discretionary fell 1.4%, leading all S&P 500 sector declines. The Federal Reserve is expected to cut rates and artificial intelligence will be a major factor in the future of the U.S. economy. Jake Dollarhide is the chief executive officer at Longbow Asset Management, located in Tulsa. "Are those nervous Nellies in gold right or is the AI trading correct?" This is what we will find out over the coming weeks and months. The Dow Jones Industrial Average dropped 91.99 points or 0.20% to 46,602.98, while the S&P 500 declined 25.69 points or 0.38% to 6,714.59, and the Nasdaq Composite was down 153.30 or 0.67% to 22,788.36. Tesla shares closed 4.4% lower. If you take a look at the stock price of Tesla since April 2, this is a complete U turn. Art Hogan is the chief market strategist of B. Riley Wealth, New York. IBM shares rose 1.5% among gainers after the company announced its partnership with AI startup Anthropic. The MSCI index of global stocks fell 3.93 points or 0.39% to 992.13. The pan-European STOXX 600 fell by 0.17%. The blue-chip French stocks lost their gains and closed flat on Tuesday after Monday's sharp selloff triggered by Lecornu’s abrupt resignation. Emmanuel Macron, France's president, was under increasing pressure to resign and/or call a snap parliamentary vote to end the political turmoil which has seen five prime ministers resign in less than two year. Lecornu held a last-ditch meeting to form a government on Tuesday. The yield on French bonds rose by 2 basis points, to 3.59%. Investors in Japan snapped up government debt in a sign that they were easing their nerves after Sanae Takaichi was elected as the leader of the ruling Party. Takaichi is a supporter of low interest rates and large spending. This led to a selloff of domestic bonds, the currency, and sent stocks to new highs. The Japanese yen fell 1.05% to 151.95 dollars, while the euro dropped 0.47% to $1.1655. Investors remained confident that the Fed would cut rates during its next meeting, which is why benchmark U.S. yields dipped. The yield on the benchmark 10-year U.S. notes dropped 3.5 basis points, to 4.127% from 4.162% at late Monday. Investors have been forced to rely on independent data and remarks by monetary policymakers to gauge the Fed's potential rate cuts. A New York Federal Reserve Bank survey showed softening labor market expectations among consumers. Prices of oil were not much different. A smaller-than-expected increase to OPEC+ output in November was offset by signs of a possible supply glut. U.S. crude oil rose by 4 cents, settling at $61.73 per barrel. Brent dropped 2 cents, settling at $65.45.
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Gold ETFs are a hot commodity as the metal's prices smash records
Analysts said that massive flows into exchange traded funds tracking gold helped to drive a spectacular rally which pushed bullion prices to record highs in the last month. On Tuesday, spot gold prices reached a new record of $3.990.85 an ounce, while U.S. futures gold for December delivery surpassed the $4,000 per ounce mark. Analysts cited the record rate at which investors were allocating money into the metal via ETFs. Investors are becoming more cautious about the sky-high stock prices and view gold as a refuge against uncertain geopolitical and economic policies. According to LSEG, gold prices have risen 51% this year. This is the biggest increase since 1979. Roukaya Ibrahim is a commodities strategist with BCA Research. She calculated that global assets in gold ETFs now account for 2,6% of total assets, up from 1,9% one year ago. Ibrahim said that the intensity of investor interests is unprecedented. Clients now talk to her for up to 90 minutes at a stretch about market movement. State Street Investment Management reported that inflows to U.S. exchange-traded funds (ETFs) such as its own SPDR gold shares had reached all-time highs of $35 billion by the end of September. This is a record-breaking amount, surpassing the previous annual record of $29 Billion, set in 2020. According to World Gold Council data, global inflows of gold ETFs have reached $64 billion for the year. This includes $17.3 billion, a new record, in September. The World Gold Council has calculated that gold ETFs saw outflows of $23 billion over the past four years. Analysts believe that gold's value can be maintained despite economic policy headwinds, and the rising geopolitical tensions. Gold can also cushion any gains made this year, as stocks have soared due to the artificial intelligence boom. Gold is a hedge to protect against the failure of AI-driven tech booms to deliver and policy implications in the event of a crash, said Thierry Wizman. David Schlesser is the head of VanEck's multi-asset solution. He said that gold, one of financial assets oldest in history, has been rising along with bitcoin. Schlesser said that both assets are not linked to any government. Schlesser says that "nothing goes up straight and we can expect some tactical pullbacks or volatility," and that volatility is "your friend" in this situation, giving traders and investors a chance for a quick entry on dips. He believes that gold prices will top $5,000 per ounce by 2026, and he urges investors not to invest less than 5% of their assets in gold. Goldman Sachs stated in a Monday note that it anticipates the holdings of Gold ETFs to continue increasing in North America, Europe and beyond as the Federal Reserve continues to lower U.S. rates until 2026. Mike Wilson, Morgan Stanley's chief investment officer, suggested that a 20% gold allocation is a good inflation hedge. Adrian Ash, BullionVault's head of research, said: "When established names like Morgan Stanley tell investors they don't have enough gold, there's no wonder that inflows into ETFs and vaulted bullion are on the rise." (Reporting and editing by Megan Davies, David Gregorio and Poline Devtt)
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Gold futures reach $4,000/oz; S&P 500 declines after recent record highs
The major stock indexes declined on Tuesday. The S&P 500 eased after recent record-highs. Investors were looking at political turmoil in France, Japan, and the U.S. shutdown. Gold futures also hit $4,000 per ounce for the very first time. Demand for Safe-haven The uncertainty surrounding the U.S. government shutdown and expectations of another U.S. rate cut have contributed to this increase. U.S. Gold futures for delivery in December settled at $4.004.4, an increase of 0.7%. Investors waited for developments in France where the shocking resignation of Sebastien lecornu as Prime Minister on Monday caused concern about France's fiscal outlook. Despite the ongoing U.S. shutdown, major U.S. indexes have been closing at record highs. This optimism is due to the possibility of Federal Reserve rate cuts and the artificial intelligence dealmaking. Jake Dollarhide is the chief executive officer at Longbow Asset Management, located in Tulsa. He said that with tech stocks, stocks, and gold at record highs, "something has to give." "Are those nervous Nellies in gold right or is the AI trading correct?" This is what we will find out over the coming weeks and months. The Dow Jones Industrial Average dropped 147.37, or 0.31 %, to 46.548.47. The S&P 500 declined 28.65, or 0.43 %, to 6,711.63 while the Nasdaq Composite lost 158.71, or 0.69 %, to 22782.96. Tesla shares were down by 4.1%, the largest drag on both the S&P 500 index and the Nasdaq index. The company had unveiled cheaper versions of the Model Y SUV as well as its Model 3 sedan. This was done to counter falling sales and waning share of the market. Consumer discretionary led the way with a drop of more than 1%. IBM shares rose 1.6% following the announcement of a partnership between Anthropic, a startup in artificial intelligence. The MSCI index of global stocks fell by 4.64 points or 0.47% to 91.42. The STOXX 600 Index fell by 0.17%. Blue-chip French stocks Closed flat after giving up gains After a sharp sell-off Monday, triggered by Lecornu’s abrupt resignation. Lecornu, who faces increasing pressure from the President Emmanuel Macron to call snap parliamentary election or resign, was given the opportunity to have last-ditch discussions with various party members on Tuesday in order to find a solution to this crisis. The yields on French bonds rose by 2 basis points, to 3.59%. Investors in Japan snapped up government debt in an indication of lessening nervousness following the election of Sanae Takaichi as leader of the ruling Party. Takaichi is a supporter of low interest rates and large spending. This led to a drop in the value of domestic bonds, the currency, and sent stocks to record highs. The Japanese yen fell 1.02% to 151.89 dollars, while the euro dropped 0.43% to $1.1659. Benchmark U.S. yields are on the decline Investors waited Further comments from Fed policymakers before the U.S. Central bank's meeting in late this month. The yield on the benchmark U.S. 10 year notes dropped 3.7 basis points from late Monday to 4.125%. Investors have been forced to rely on independent data and remarks by monetary policymakers to gauge the Fed's outlook for rate cuts. The oil price was little changed. A smaller-than-expected increase to OPEC+ output in November was Offset by signs A possible glut of supply is a concern. U.S. crude oil rose by 4 cents, settling at $61.73 per barrel. Brent dropped 2 cents, settling at $65.45. Investors digested the news that the World Bank raised its growth forecasts for China in 2025, as well as those for most of the region. However, it warned about a slowdown next year.
Oil prices rise on fading fears of oversupply after OPEC+ restricts output
Early Wednesday, oil prices rose as the markets began to dismiss oversupply fears for now. This was after digesting a decision made by OPEC+ in November to limit production increases.
Brent crude futures were up 40 cents or 0.6% to $65.85 per barrel at 0045 GMT. U.S. West Texas Intermediate Crude climbed 44 cents or 0.7% to $62.17.
The benchmarks settled broadly flat in the previous session as investors weighed signs of a supply glut against a smaller-than-expected increase to November output from the Organization of the Petroleum Exporting Countries and affiliates.
OPEC+ chose to increase production by 137,000 barrels a week, the lowest of the options discussed over the weekend.
Investors are likely to discount production increases until the physical market softens via increasing inventories. This was the conclusion of ANZ analysts on Wednesday.
Analysts said that the price gains were capped by the fact that the fear of Russian disruptions in supply has eased. Crude oil shipments have been close to 16-months highs over the last four weeks.
Energy Information Administration will also be releasing U.S. Inventory trends later on Wednesday.
U.S. crude stock levels rose by 2,78 million barrels during the week ending October 3, according to sources citing American Petroleum Institute data.
The sources cited API data to say that gasoline and distillate stocks fell.
The EIA reported on Tuesday that the U.S. production of oil is expected to be higher than originally anticipated this year. (Reporting and editing by Christopher Cushing; Jeslyn Lerh)
(source: Reuters)