Last week, gold prices continued their impressive ascent, defying pressures from U.S. economic data and achieving a remarkable sixth consecutive weekly gain. This rally was primarily fueled by expectations of interest rate cuts from the Federal Reserve. Spot gold closed slightly up by 0.3% on Friday at $3,761.17 per ounce, marking a weekly gain of approximately 2% and hitting a record high of $3,790.97 during the week. This bull market in gold has not only captured the attention of institutional investors but has also ignited enthusiasm among retail investors. Other precious metals, such as silver and platinum, have also reached multi-year highs. Amid geopolitical tensions, shifts in Fed policy, and a global trend towards de-dollarization, gold’s strong performance appears unstoppable.
I. The Steady Pillar Amid a Data Storm: PCE and Rate Cut Expectations
On Friday, the core Personal Consumption Expenditures (PCE) price index for August was the focal point of market attention. The data revealed a year-on-year increase of 2.7%, aligning perfectly with market expectations. This ‘moderate’ report served as an ideal scorecard for the gold market, indicating neither runaway inflation nor complete control over inflation. This delicate balance reinforced market bets that the Federal Reserve would continue to cut interest rates within the year.
Current market pricing suggests a nearly 90% probability that the Federal Reserve will cut interest rates in October, with a likelihood exceeding 60% for another cut in December. Independent metals trader Tai Wong noted that this data would not deter the Fed from maintaining a cautious pace of rate cuts at the upcoming meeting. Such expectations of accommodative monetary policy serve as a fundamental pillar supporting gold prices, reducing the opportunity cost of holding non-interest-bearing assets like gold.
II. A Rising Tide Lifts All Boats: Silver and Platinum’s Epic Performance
The strength of gold is not an isolated phenomenon; the entire precious metals family is experiencing a rally. Spot silver surged 2% on Friday, reaching $46.61 per ounce, marking a more than fourteen-year high. Platinum also performed robustly, rising 2.5% to $1,584.15 per ounce, refreshing its highest level in over twelve years.
This across-the-board rally reveals a deeper market logic: as gold prices continue to climb to historic highs, some investors are turning to relatively ‘affordable’ silver and platinum as alternatives. This rotation phenomenon broadens the foundation of the precious metals bull market and reflects a spreading bullish sentiment from institutions to a wider base of retail investors. Rich Checkan, President of Asset Strategies International, noted that the declining gold-to-silver ratio indicates that retail investors are awakening from their slumber.
III. The Dollar Paradox and Gold’s Resilience
An intriguing aspect of last week’s market dynamics is that, despite the U.S. Dollar Index recording its second consecutive weekly gain, gold prices surged. This challenges the conventional wisdom of a simple inverse relationship between the dollar and gold. A strong dollar typically reflects the relative resilience of the U.S. economy, as evidenced by consumer spending growth and upward revisions in GDP figures. These factors, which should have dampened rate-cut expectations and been bearish for gold, failed to halt its rise.
Adam Button, Head of Currency Strategy at Forexlive, expressed amazement at gold’s resilience, stating that last week was a significant test for the metal. Despite strong economic data and widespread profit-taking, gold managed to post gains, indicating that the forces driving its rise are diverse and robust. Gold is carving out its own independent trajectory.
IV. Invisible Forces: Geopolitical Risks and the De-dollarization Wave
Beyond traditional economic factors, two powerful undercurrents are providing continuous momentum for gold. The first is escalating geopolitical risks. Tensions in Eastern Europe and the potential for another U.S. government shutdown have prompted investors to seek gold as a traditional safe haven.
The second factor is the ongoing “de-dollarization” process. Adrian Day, President of Adrian Day Asset Management, emphasized that the status of the U.S. dollar as the world’s primary reserve asset is being challenged. Central banks, motivated by national security and asset diversification, are strategically increasing their gold reserves. Kevin Grady, President of Phoenix Futures and Options, pointed out that the current market is dominated by “strong players,” meaning central banks that are not merely trading but strategically allocating reserves. As long as their rationale for purchasing remains unchanged, they will not stop buying due to short-term price fluctuations.
V. The Road Ahead: Is $4,000 Within Reach?
Looking ahead, market focus will shift to employment data. This week will see the release of various key indicators, including pending home sales, JOLTS job openings, consumer confidence figures, and the highly anticipated nonfarm payroll report. These data points will test whether last month’s weak employment trend persists and will influence the magnitude of the Fed’s October rate cut.
Analysts generally believe that if employment data is weak, expectations for rate cuts will intensify, potentially pushing gold above $3,800. Even if the data is strong, gold’s resilience is likely to maintain its upward momentum. Geopolitical uncertainties and ongoing central bank gold purchases will continue to provide support, with many experts asserting that “$4,000 is within sight.” Michael Moor, founder of Moor Analytics, anticipates further price increases this week.
Overall, gold’s structural bull market is far from over. Investors should focus on the interplay of multiple factors. From a technical perspective, gold prices are firmly holding near historical highs, and any minor pullbacks are likely to attract new buying interest. Market bullish sentiment has reached unprecedented levels.
Last week’s Kitco News Gold Weekly Survey revealed remarkable market optimism. Among 19 Wall Street analysts, 84% expected gold prices to rise this week, with none predicting a decline. Among retail investors, 63% were bullish, reflecting the strength of gold’s appeal across the board.
Conclusion
The current gold market is a symphony composed of monetary policy expectations, asset rotation, geopolitical risks, and significant changes in the global monetary system. Its demonstrated resilience indicates that this is not a fleeting speculative frenzy but a long-term trend grounded in solid logic. With continued central bank gold purchases, awakening retail investors, and lingering macroeconomic uncertainties, the bull market for gold is far from over. As the market adage goes, it may be wise not to fight an unstoppable train—trend remains your best friend.
As of 07:01 Beijing Time, spot gold is reported at USD 3,769.77 per ounce, signaling that the golden surge is poised to continue.
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