4,000 - and not the least bit tired

Since the start of this week it seemed only a matter of time before gold prices would, for the first time in their history, trade above US$4,000 per ounce. That moment duly arrived yesterday (Wednesday) during Asian trading. Many market participants had bet that prices would promptly shift into reverse once the “4” appeared at the front. They were swiftly proved wrong. The price climbed further to around US$4,059/oz. 

At present, buyers of gold ETCs and ETFs are the primary drivers of the rally. They have been increasing their holdings worldwide for nine consecutive days - by about 30,000 ounces on Wednesday alone and by roughly 14 million ounces net since the start of the year. 

Demand for gold ETCs/ETFs has surged in recent weeks: record purchases were reported in September, and the third quarter saw record sales of US$26bn. The United States (US$16.1bn) and Europe (US$8.2bn) stood out on the buy side. Even so, at 3,838 tonnes the aggregate ETC gold holdings remain below the record level of November 2020, so the market does not appear overbought. 

Speculative market players were also very active on US futures exchanges in September, accounting for purchases of 33 tonnes worth US$9bn. In addition, data for August indicate that central banks remain on the buy side - most recently led by Kazakhstan, Bulgaria and El Salvador. China has already reported further purchases by its central bank for September. 

Last Thursday morning gold was still quoted at US$3,870/oz; that same afternoon it missed the US$3,900 mark by a whisker and slipped back to US$3,820/oz. On Monday night, during Asian trading, the US$3,900/oz threshold was breached for the first time. Like a hot knife through butter, the price surged the same day to US$3,964/oz. This was also driven by record-high yields on 30-year Japanese government bonds amid concern over rapidly rising public debt. And Monday also brought yet another resignation of a French government… The “safe-haven” theme therefore continues to play a role. On Tuesday, gold still fell just short of the 4,000 peak; last night in Asia it finally made it. There was no pause for breath: by the evening it had moved up to US$4,059/oz. Gold is entering today’s European session at around US$4,038/oz.

The Xetra-Gold price did not escape the upward pull; on the contrary, a somewhat weaker euro against the US dollar gave it additional tailwind. During regular trading hours it moved up sharply from €106.00/g on Thursday morning last week to €112.15/g by yesterday morning; the trading day ended not much lower at €112.00/g. If the 08:00 price still holds at the start of trading, Xetra-Gold is likely to start trading this morning at around, or just below, €111.60/g - so not far from the record high.

At the moment, many market segments are moving upwards - stock indices, bonds (again yesterday), Bitcoin, gold and the other precious metals, as well as copper. This is rather unusual. More generally, however, the issue of government debt has recently moved back into sharper focus around the globe - whether in relation to the debts of the United States, Japan, the United Kingdom, France or, to a lesser extent, Germany. This should keep demand for gold high as an asset that cannot be created at will, though a seven-week rally with virtually no temporary pullbacks is quite unusual.

I wish all readers a relaxing - and hopefully a little sunnier - weekend