Gold saw a strong performance in August, rising 3.6% to close at US$2,513/oz, briefly hitting an all-time high mid-month. This was driven by a sharp decline in the US dollar and lower Treasury yields as the Fed signaled upcoming interest rate cuts. Momentum from July’s gains slightly tempered August’s performance.
Key developments:
Fed Rate Cuts: Lower yields and a weaker dollar supported gold prices. Investors are increasingly positioning for rate cuts, which could further benefit gold.
India Demand Surge: A reduction in India’s gold import duty spurred increased demand, particularly in the jewelry sector.
ETF Inflows: Gold ETFs saw continued global inflows, especially from Western funds, marking the fourth consecutive month of positive demand.
Looking forward, economic uncertainty and election risks are contributing to higher activity in gold options markets, with investors hedging against possible outcomes. The macro environment remains fluid, but gold is seen as a hedge against immediate risks, benefiting from lower interest rate expectations.
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