Gold prices surged on Friday, notching their 28th all-time settlement high for the year so far, with the precious metal finding new support. Some analysts attempted to explain the surge—especially on Friday—as investors seeking a safe haven. However, the way equity markets have traded higher makes that view seem illogical. If anything, it appears to be more about gold investors positioning themselves for a further rise in prices as the Fed’s meeting in mid-September approaches.
This week’s comments from Fed Chair Jay Powell at the annual Jackson Hole conference in the US on Friday could provide an early indication of the strength of the safe haven argument. Powell is expected to set up a rate cut in his comments and ensure the market understands that further cuts will be 'data dependent.'
There will be ample data for the Fed to analyse, including the second estimate of US second-quarter GDP, the Fed’s favoured inflation data, and the August jobs report, CPI, and PPI, before the central bank’s meeting on September 17 and 18. On Friday, a dip in US bond yields and weakness in the greenback likely contributed to prices—both spot and futures—charging over $2,500 an ounce and closing above that once-thought-impossible level. The US 10-year bond yield dropped 6 basis points over the week, ending Friday at 3.88%, while the US dollar also lost ground, with the Aussie dollar ending at 66.70 US cents on Friday evening, up 1.5% for the week.
Comex gold for December delivery climbed $45.40, or 1.8%, to settle at $2,537.80 an ounce on Comex, after trading as high as $2,538.70. Based on the most-active contract, prices reached a fresh intraday record high and an all-time settlement high. Spot prices also rose past $2,500 an ounce and closed above that level for the first time, around $2,508 an ounce. This saw the Aussie dollar price rise to $3,760 an ounce—it would have topped $3,800 if not for a nearly 1% rise in the value of the Aussie dollar on Friday, which ended the week at 66.70 US cents, up 1.5% for a strong week.
Like equities, gold sank during the strange trading at the start of this month, hitting a low of $2,403.80. The rebound has been solid and came as equities regained strength and then rebounded strongly. According to Saxo Bank's head of commodity strategy, Ole Hansen, the better-than-expected US economic data eased worries of a severe downturn in the world’s largest economy. Hansen noted that Saxo Bank maintains a positive view on gold as a hedge against market turmoil, alongside continued demand from central banks, investor concerns about elevated government debt levels, and rate-cut hopes.
Silver futures had a strong day and week, ending up 5.1% for the five days and 2.3% on Friday at $29.085 an ounce.
Copper held onto its gains, with the Comex futures price adding more than 4% over the week, despite weak Chinese economic data. Copper ended at $4.15, up from below $4 at the start of the month.
Iron ore prices continued their decline on the SGX trading platform, ending the week at $92.30 a tonne—the lowest price for more than a year and down sharply from $101.09 the week before and $114 at the start of August.
