Gold rises 6.8% in October!

Recently, the World Gold Council (WGC) published their Gold Market Commentary and said, Gold finishes October on a high! In the October in review, key takeaways from WGC is 1: gold gained 6.8% in October, reversing an early-month slump to finish at US$1,997/oz, the highest daily close since May and a record monthly close for the LBMA gold price PM.

2: Safe haven flows driven by geopolitical tensions partly captured by strong inflows into COMEX futures and ETF options were likely behind the move. While in a Looking forward; WGC highlighted, 1: COMEX net shorts reversals are a historically reliable positive signal for gold prices, and have tended to lead ETF flows.

2: A sustained rally in gold will in our view require either: continued or worsening political risk, a peak in bond yields and the US dollar, or an equity bear market combined with revived recession risks.

Gold Market Commentary-WGC remember the October as, a record month-end finish! Gold prices started the month on the back foot, having fallen below US$1,850/oz at the end of September. The events in Israel on 6 October set a rally in motion that took the US dollar price back up above US$2,000/oz by 27 October.

The record-high monthly finish was mirrored in almost all other major currencies. Our gold model GRAM attributed the bulk of this move to the residual, in this instance likely capturing a spike in geopolitical tension, which we discussed in a recent blog. The large contribution from a rise in implied volatility and breakeven inflation rates as well as the strength in the Swiss franc (not in our model) pointed to safe-haven flows as a dominant motive.

In addition, COMEX futures also weighed in, with short covering (-87t) and new longs (+84t) taking net longs higher by 171t (US$11.3bn). Despite positive flows in futures, global gold ETFs saw another month of outflows (-US$2.2bn, -38t), two thirds from North America and one third from Europe. By the end of the month, flows appeared to have troughed with a small pick up towards the end of the month partly driven by options expiry in the US.

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