The Australian dollar gold price has marked a new record, punching through the $4,000-an-ounce mark yesterday (16 October).
From its lowest point of $536 in 2004, through to its current price of over $4,000, the price has rocketed nearly 650%.
The reason for the new record: significant pressure on the AUD/USD, which has seen it drop below US$0.067 – a key support level and a new five-week low.
This is reportedly due to concerns raised by traders that economic stimulus by China would not boost its economy.
In US dollar terms, the gold price is trading at over US$2,675 an ounce, which, at the current exchange rate, equates to around $4,011 an ounce.
Ole Hansen, Head of Commodity Strategy for Danish investment bank Saxo, says since hitting a cycle low last October, the gold rally has continued to accelerate, highlighting the level of “FOMO” (fear of missing out), and the fundamental support the metal has and continues to enjoy.
“In the short term, traders will be watching incoming US data to see whether support remains strong enough for the metal to reach another fresh record, the sixth this year,” Hansen says.
“The bullish drivers throughout this period are numerous, with the most important being the risk of fiscal instability, safe-haven appeal, geopolitical tensions, de-dollarisation, uncertainties surrounding the US presidential election, and now also rate cuts – not just by the Fed, but by other central banks as well – reducing the cost of holding non-interest-paying investments in gold and silver.
“The latter potentially supports increased demand for gold-backed ETFs from underinvested asset managers, especially in the West, who, up until May, had been net sellers since the FOMC (Federal Open Market Committee) began its aggressive rate hikes in 2022.”
Overnight S&P Global Ratings updated its prices for a range of metals, including gold.
The American credit rating agency now sees gold trading at around US$2,500 an ounce for the rest of 2024, up from its May estimate of US$2,100 an ounce.
Looking further ahead, S&P forecasts the price of the safehaven metal will retrace some of its gains to fetch around US$2,300 an ounce — up from US$2,000 an ounce previously — before declining further to US$2,100 in 2026, versus its previous estimate of US$1,700 an ounce.
Donald Marleau, an analyst at S&P Global Ratings, says gold’s ascent of late stems from heightened geopolitical risks, a higher-than-anticipated interest rate cut by the US Federal Reserve, and uncertainty about the US election.
“Unease over a range of geopolitical factors such as the conflicts in the Middle East and Ukraine, and the US election, likely support demand for gold as a safe-haven investment, in our view,” he says.
“Further adding to investors’ appetite for gold was the Fed’s 50 basis point cut to its overnight bank funding rate on Sept 18, and signals that more rate cuts are likely, which could put downward pressure on the US dollar and support gold prices from already record levels.
“Our revised gold price assumptions reflect our view that prices could remain elevated for several years, although recede from record highs.”
Write to Angela East at Mining.com.au
Images: Unsplash & Goldprice.org
