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Gold is primarily traded on three key markets: the Over-the-Counter (OTC) London market, the US futures market (COMEX), and the Shanghai Gold Exchange (SGE). The standard gold futures contract is for 100 troy ounces. The precious mineral remains an attractive investment, particularly during periods of political and economic uncertainty. Globally, half of all gold consumption is for jewelry, 40% is used in investments, and 10% in industry. The top gold-producing nations include China, Australia, the United States, South Africa, Russia, Peru, and Indonesia, while India, China, the United States, Turkey, Saudi Arabia, Russia, and the UAE are the largest consumers of gold jewelry.
The gold prices referenced on Trading Economics are based on over-the-counter (OTC) and contract for difference (CFD) financial instruments, making these markets crucial for understanding global price trends.
Gold prices have hit record highs recently, driven by weak labor market data that has sparked expectations of an interest rate cut by the US Federal Reserve. A rise in initial jobless claims and an unexpectedly fast increase in the producer price index have led to a dip in US Treasury yields and the US dollar. Investors are now betting on a 25 basis points (bps) cut by the Fed next week, with some speculating on a 50 bps cut. This rally has also been supported by the unwinding of previously bearish bets, though overall inflation trends indicate easing.
Markets currently suggest a 59% chance of a 25 bps cut and a 41% chance of a 50 bps reduction. The bullish sentiment for gold is further fueled by Comex gold and GLD ETF options, which have extended gold’s 2024 bull market, pushing prices to fresh highs in multiple major currencies. Investors believe that the Federal Reserve will lower US interest rates by a half-point rather than a quarter-point at next week’s meeting.
Interestingly, this surge in gold prices has puzzled some traders, especially since China’s central bank has not added to its gold reserves for four months after being a key buyer earlier in the year. Gold has continued to break records despite China’s inactivity in the market.
The price of gold soared to all-time highs in both US dollars and euros on Thursday as the European Central Bank cut interest rates for the second time this year, coupled with weaker-than-expected US inflation data ahead of the Fed’s decision. Bullion has gained approximately 3% over the past week. As the dollar fell to a one-week low, gold—priced in greenbacks—became cheaper for investors holding other currencies.
Looking ahead, the prospect of a prolonged interest rate easing cycle bodes well for non-yielding assets like gold. In recent months, Saudi Arabia and other Asian countries have been actively adding gold to their central bank reserves, further supporting the precious metal’s rise. Over the past five years, gold prices have increased by 72%, with lows at $1,452.05 and highs at $2,586.02 per ounce. Analysts forecast prices could reach $3,000 to $5,000 in the coming years as central banks continue to build reserves and geopolitical tensions escalate.
The yen has been another top performer this week, gaining about 14% against the US dollar this quarter. Investors are preparing for the Bank of Japan’s rate decision next week. While a policy move is not expected at the upcoming meeting, more than half of market watchers anticipate a rate hike by December.
Gold continued its upward trend throughout the week, hitting new all-time highs at $2,586.02 per ounce on Friday. This marks a second consecutive day of strong performance, with the market on track for a 3.3% weekly gain. The anticipated Fed rate cut next week—potentially 50 basis points—has fueled the strong bullish sentiment driving gold prices. Below is a summary of gold prices in USD per ounce from Monday, 9th September to Friday, 13th September:
Gold’s safe-haven appeal continues to drive prices higher. Analysts expect the price to average $2,600 per ounce, give or take $50, over the next week, driven by ongoing uncertainty and market volatility.
Conclusively, the gold market continues to surge, with interest rate cuts on the horizon and geopolitical uncertainty supporting demand. As central banks around the world continue to stockpile gold reserves, the precious metal’s upward trajectory is likely to persist, making it a key asset for investors seeking stability in turbulent times.