- Commodity price hits new high
- Lower rates a major driver
- Central banks have been buying
For the first time in history a gold bar now costs $1 million after the London spot price for the precious metal exceeded $2,500 per ounce (a gold bar typically weighs 400 ounces).
With interest rates set to fall globally, except in Japan, and central banks buying up large stockpiles, retail investor interest in gold has soared this year.
MULTIPLE SUPPORTING FACTORS
The price of the precious metal has risen more than 20% this year and currently stands at $2,518 per ounce, making it one of the best-performing asset classes, yet some analysts see scope for further gains.
Wayne Gordon, commodities strategist at the wealth management unit of Swiss bank UBS, argues rate cuts from the Federal Reserve, central bank buying and demand from investors looking to hedge their portfolios against stock market volatility could push the gold price to $2,700 per ounce by the middle of next year.
Lower headline interest rates mean lower real interest rates, which is positive for commodities like gold which pay no interest.
Meanwhile, according to Bloomberg, in the first half of 2024 central bank net purchases of gold reached 483 tons, the equivalent of nearly 40,000 gold bars.
Net buying of gold futures on the Comex exchange hit a four-year high in July according to the US CTFC (Commodity Futures Trading Commission), and there has been a sea-change in gold ETF (exchange-traded funds) flows with money pouring in over the last two months compared with outflows up until May.
Lastly, the World Gold Council, which represents gold producers, says physical buying of bars by family offices in Asia helped consumption of the precious metal hit its second-best quarter in at least 25 years, according to a Bloomberg report.
Issue Date: 20 Aug 2024
