In the latter half of this week, the precious metals market turned optimistic, resuming its upward trend. Previously, driven by factors such as the Federal Reserve's interest rate cut and the escalation of geopolitical conflicts, international gold prices broke through $2,700 per ounce on September 26, setting a historical record. However, as the subsequent expectations for the Federal Reserve's rate cut cooled down, gold prices experienced a "six-day losing streak."
As of the close on Friday, both COMEX gold and London gold rose by more than 1%, currently hovering around $2,674 per ounce and $2,657 per ounce, respectively, essentially recouping the losses during the previous National Day holiday period.
Regarding the reasons for the recent halt in the decline and rebound in gold prices, Xia Yingying, a non-ferrous metal analyst at Nanhua Futures, told reporters from the Futures Daily that as the previous bearish news was exhausted, gold prices were still driven by the safe-haven sentiment under the influence of geopolitical factors.
From the bearish perspective, Xia Yingying said that after the Federal Reserve's interest rate cut of 50 basis points at the September meeting, the minutes of the meeting released in the early hours of Thursday showed that there were still disagreements among officials. In addition to one person voting for a 25 basis point cut, some officials who supported a 50 basis point cut also believed that a 25 basis point cut would be appropriate, reflecting that the quality of the 50 basis point cut in September was not high. At the same time, participants emphasized that a 50 basis point cut should not be interpreted as a sign of economic recession risk, and a substantial rate cut is not the norm, which directly led to further cooling of expectations for a rate cut in November. The U.S. core CPI data for September, released on Thursday evening, slightly exceeded expectations, further pushing expectations for the November rate cut towards 25 basis points.
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"Under the above two bearish news, the overall performance of precious metals is still relatively resistant to falls, and after the bearish news is exhausted, it shows an upward trend. The strong U.S. non-farm employment report released last Friday and the statements of Federal Reserve officials have already pushed expectations for the November rate cut from 50 basis points to 25 basis points, and precious metals also continued to adjust in the first half of the week," Xia Yingying said.
Another important factor in the rise of gold prices is the escalation of the situation in the Middle East. Jia Yingying told reporters that Israel's claim of retaliation against Iran and concerns about possible attacks on Iranian oil facilities have triggered a surge in oil prices, which also boosted gold's safe-haven and inflation trades.
Data shows that this year, the international gold price has risen by nearly 30%, performing brilliantly in commodity futures. Looking at the main factors driving gold prices, Jia Yingying analyzed that since 2024, the fluctuation in central bank gold purchases has become more stable, while investment demand has become more sensitive during the monetary policy switching cycle. The core factors affecting gold demand have also switched back to the investment demand side, and the main driver affecting investment demand still lies in the risk preference under the current economic, political, and financial environment, as well as changes in the Federal Reserve's monetary policy.
Looking forward to the fourth quarter, Jia Yingying said that since the Federal Reserve started the interest rate cut cycle on September 19, under the expectation of a "soft landing" for its own economy, the September dot plot shows that the conservative expectation for this round of rate cuts is 250 basis points, until 2026. The current rate cut is still in the early stage, and as the rate cut further progresses, precious metals are still expected to rise further driven by investment demand.
"In addition, geopolitical events, the U.S. election, and financial market risks will provide phased safe-haven buying support for the rise in gold prices," Jia Yingying said.
Recently, gold research reports released by several institutions believe that there is still a lot of uncertainty in the market in the fourth quarter of this year. The pace and magnitude of the Federal Reserve's rate cuts, geopolitical issues, and the changes in market sentiment caused by the global risk asset rise driven by domestic policy "combination punches" will all have an impact on the fluctuations in gold prices.