Why did gold prices hit an 'all-time high' in August?

DNVN - According to the World Gold Council (WGC)'s August gold market commentary, August was a notable month for the gold market when on August 20, the gold price reached an all-time high of 2,557 USD/ounce before decreasing slightly at the end of the month.

According to the World Gold Council's Gold Yield Allocation Model (GRAM), the main factors driving the rise in gold prices are the weakening of the US dollar and the slide in 10-year bond yields as the US Federal Reserve (Fed) shows the possibility of more interest rate cuts.

However, gold's strong investment performance in July negatively impacted returns, as high returns typically lead to lower gains in subsequent periods.

India’s recent reduction in import duty on gold has boosted the country’s gold demand, as evidenced by a surge in demand from jewellery retailers and consumers. Meanwhile, global gold-backed exchange-traded funds (ETFs) have seen inflows for four consecutive months, driven largely by Western funds.

August 2024 Gold prices witnessed a strong increase amid economic uncertainty.

With economic data being mixed, it is difficult to interpret the current macroeconomic situation. The upcoming US presidential election has further fueled investor activity in the options markets. Gold options trading, a less volatile investment segment, has reached a multi-year high, suggesting hedging or speculation by investors linked to the rate-cutting cycle and the US presidential election.

Globally, economic indicators remain positive, with GDP growth at 2.5% and the composite Purchasing Managers’ Index (PMI) remaining upbeat. However, manufacturing, particularly in Europe and China, remains sluggish. In the US, the economic outlook is mixed. While the composite PMI has shown modest growth and consumer sentiment has improved, rising unemployment and rising delinquencies point to potential economic stress.

Fed Chairman Jerome Powell’s recent speech at the Jackson Hole economic conference suggested that more rate cuts are likely. Despite the Fed’s positive economic outlook, short-term interest rate markets have remained largely unchanged, pricing in nearly 100 basis points of cuts by year-end. The Fed’s approach likely balances the need to avoid a recession with the risk of resurgent inflation.

“As investors seek to manage this economic uncertainty, gold is increasingly seen as an immediate hedge against risk while also benefiting from the potential for lower interest rates,” said Shaokai Fan, Director, Asia Pacific (excluding China) and Global Head of Central Banks at the World Gold Council. “The upcoming Fed meeting in September will play a key role in shaping market sentiment and expectations. Regardless of the election outcome, the favorable conditions for gold are expected to continue.”

Hoang Phuong

Source: https://doanhnghiepvn.vn/kinh-te/tieu-dung/vi-sao-gia-vang-tang-cao-nhat-moi-thoi-dai-trong-thang-8/20240918025857200