Gold prices hit another new high on Friday, spurred by the uncertainty over the US presidential elections, besides haven demand in view of the geopolitical tensions in the Middle East.
Spot gold soared to record high $2,715 a troy ounce, while futures for delivery in December in the US were $2,730.
In India, gold December contracts on MCX were ₹77,669 per 10 gm. Spot prices for jewellery gold in Mumbai closed at ₹75,550 per 10 gm. Prices in the domestic market, too, have zoomed to a record high. Prices of the precious metal are up over 30 per cent in 2024.
Outperforms S&P 500
Analysts said gold has been boosted by the US employment data that showed jobless claims dropped to 241,000 this week. This has given rise to speculation that the US Fed may hold interest rates steady in November
Data from TradingView showed that gold has outperformed the S&P 500 since 2005. The precious metal has increased by 455 per cent against 422 by the index.
Research agency BMI, a unit of Fitch Solutions, said precious metals have now outperformed all commodity sub-asset classes, with the Bloomberg Precious Metals Index rising by 0.5 per cent in the month-to-date up to October 17.
ING Think, the financial and economic wing of Dutch multinational financial services firm ING said traders are seeking safety in gold this morning after Israel said it killed Hamas leader Yahya Sinwar.
“...(Israel) Prime Minister Benjamin Netanyahu said Israel would keep fighting until all the hostages seized by Hamas last year are free, even though US President Joe Biden said it was time for the war to end,” it said.
Preferred hedge
Gold is one of this year’s strongest performing commodities, with its gains supported by rate-cut optimism, strong central bank buying and robust Asian purchases, ING Think said. Its view was supported by US multinational financial services firm Goldman Sachs.
“Gold is our strategists’ preferred near-term long (the commodity they most expect to go up in the short term), and it’s also their preferred hedge against geopolitical and financial risks,” said Goldman Sachs in a note.
Its strategists Samantha Dart and Lina Thomas said “gold stands out as the commodity where we have the highest confidence in near-term upside” in this softer cyclical environment.
ING Think said the US presidential election in November will also continue to add to gold’s upward momentum through to the end of the year.
Who controls Congress matters
Gold is likely to perform well regardless of the election outcome. Central banks are also expected to keep adding to their holdings, which should offer support, the ING arm said.
BMI said it is now neutral to bullish towards gold for the fourth quarter of 2024 and the first quarter of 2025. It expects prices to trade in the range of $2,500-2,800 per ounce in the coming months.
Dean Belder of Investing News said changes post-US presidential elections, on a broad scale, tend to normalise fairly quickly. He does not see either Donal Trump or Kamala Harris — the US presential election candidates — having a major impact on gold prices.
“The outcome of the election will have ideological consequences, but it’ll make no difference to gold, silver, uranium or the commodities super-cycle,” he said. However, he said which party controls Congress, which is comprised of the House and Senate, will have a far stronger influence on the gold price.
“Under Democrat-controlled Congresses, gold has averaged a 20.9 per cent gain, compared to just 3.9 per cent when Congress is controlled by Republicans. In cases where neither controls Congress, gold has averaged 3.5 per cent,” said Belder.
Investment demand to dip
ING Think said it believes the macro picture combined with haven demand amid an escalation of tensions in the Middle East and the ongoing war in Ukraine will drive gold to new highs.
Ray Jia, Research Head, China, WGC, said during the fourth quarter — the peak consumption season — gold demand will likely improve. However, he cautioned that investment demand for gold may slow as investor risk appetite was picking up.