COMEX Gold futures consolidated around a record high of $2800 per ounce as the month of October 2024 drew to a close. Overall sentiments remained supported for the metal after recent spike as geopolitical climate is challenging and continues to support the commodity. Gold gained around 5% this month after clocking a similar gain in September too. The metal is up a whopping 35% this year amid sustained policy uncertainty, good demand from central banks and worries over geopolitical clashes. Fed cutting rates for the first time in four years has propelled the metal into a whole new trajectory in this month as a spike in US dollar index and rising US yields has had no impact on the metal whatsoever. Meanwhile, Gold has also been largely oblivious to crude oil prices. WTI Crude oil futures gained from one month lows but $70 per barrel capped upside for the commodity. Oil has moved in a range of around $66-$78 this month.

Goldexploded in recent months as markets focused on volatile global equities and firm Indian demand trends. Earlier this year, there was a reduction in India’s Gold import duties from 15% to 6%. Gold stayed supported thereafter, hitting record highs on a sustained basis with markets closely tracking developments in the Middle East. Geopolitical concerns drove gold past the $2700 per ounce mark in last week of September though a sharp spike in the US dollar index thereafter led to some sideways movement. The metal soon found its footing above this level though as escalating tensions, with Israel vowing to retaliate against Iran, kept safe-haven demand steady.

In a key decision for Gold in mid-September 2024, US Federal Reserve announced its widely expected decision to lower interest rates for the first time in over four years, aggressively slashing rates by half a percentage point.With the Fed saying officials have gained greater confidence inflation is moving sustainably toward its 2 percent target, the central bank lowered the target range for the federal funds rate by 50 basis points to 4.75 to 5.00 percent.The Fed was almost universally expected to cut rates for the first time since March 2020, but there was some debate over whether it would lower rates by 25 or 50 basis points.The decision to opt for the larger rate cut came as the Fed said the risks to achieving its employment and inflation goals are roughly in balance.The economic projections provided by Fed officials at the meeting suggested the central bank will cut rates by another 50 basis points by the end of the year.Fed officials also expect to continue lowering rates next year, with the projections indicating rates will be lower by another full percentage point by the end of 2025.

A "substantial majority" of Fed policymakers supported an interest rate cut in September as they assessed that risks to the employment and inflation goals were almost in balance, the minutes of the latest rate-setting session showed."Given the significant progress made since the Committee first set its target range for the federal funds rate at 5-1/4 to 5-1/2 percent, a substantial majority of participants supported lowering the target range for the federal funds rate by 50 basis points to 4-3/4 to 5 percent," the minutes of the September 17-18 Federal Open Market Committee session, led by Fed Chair Jerome Powell, said.

Gold demand gains 3% on year in September quarter

The World Gold Council's Q3 2024 report reveals a 5% year-on-year rise in total gold demand, reaching a record 1,313 tonnes and crossing the $100 billion mark for the first time. Global investment demand surged by over 100%, driven by Western interest in gold ETFs, which gained 95 tonnes, marking their first positive quarter since early 2022. Although bar and coin demand dipped 9%, year-to-date totals remain above the decade average at 859 tonnes. Central bank demand softened but remained steady at 186 tonnes, in line with 2022 levels.

Gold prices hit new highs, averaging $2,474/oz, impacting jewellery demand, which dropped 12% by volume but increased 13% in value. Meanwhile, demand from the technology sector rose 7%, spurred by the ongoing AI boom. Gold supply also grew 5%, led by a 6% boost in mining and an 11% increase in recycling.

World Gold Council or WGC stated in a latest quarterly update that total gold supply grew by 5% y/y to a record 1,313 tonnes in September quarter. Mine production grew 6% y/y to another quarterly record and y-t-d output has eclipsed the 2018 prior high. Recycled gold volumes rose 11% y/y, but widespread distress selling is not yet in evidence. 

WGC noted that investment flows were key to gold’s performance in Q3. Falling interest rates, geopolitical uncertainty, portfolio diversification and momentum buying were among the key drivers. The 2024 full year outlook for Gold is resurgent as professional flows combined with solid bar and coin investment will offset weaker consumer demand and slower central bank buying.

Total Gold supply jumps 5% on year in September quarter

World Gold Council or WGC stated in a latest quarterly update that total gold supply grew by 5% y/y to a record 1,313 tonnes in September quarter. Mine production grew 6% y/y to another quarterly record and y-t-d output has eclipsed the 2018 prior high. Recycled gold volumes rose 11% y/y, but widespread distress selling is not yet in evidence.  It noted that investment flows were key to gold’s performance in Q3. Falling interest rates, geopolitical uncertainty, portfolio diversification and momentum buying were among the key drivers. The 2024 full year outlook for Gold is resurgent as professional flows combined with solid bar and coin investment will offset weaker consumer demand and slower central bank buying.

Reserve Bank holds 854.73 metric tonnes of gold

Reserve Bank of India (RBI) has stated in a latest update that as at end-September 2024, the Reserve Bank held 854.73 metric tonnes of gold, of which 510.46 metric tonnes were held domestically. While 324.01 metric tonnes of gold were kept in safe custody with the Bank of England and the Bank for International Settlements (BIS), 20.26 metric tonnes were held in the form of gold deposits. In value terms (USD), the share of gold in the total foreign exchange reserves increased from 8.15 per cent as at end-March 2024 to about 9.32 per cent as at end-September 2024.

Gold’s long run return has been well over inflation says WGC

World Gold Council or WGC stated in a latest update that gold’s long-run return has been well above inflation for over 50 years, closely mirroring global gross domestic product (GDP), a proxy for the economic expansion driver. WGC calls this approach as Gold Long-Term Expected Return or GLTER – which uses the distribution of above-ground gold stocks analyzed via different demand categories as a foundation and starting point. The drivers of gold buyers across various demand segments – jewellery and technology fabrication, central banks, financial investment, retail bars and coins – are crucially broader and more important than existing theories suggest.

Outlook:

With the global Gold prices hitting record highs on a continued basis in recent weeks, the positioning in the futures market is becoming a key barometer to judge the underlying price action. Precious metals speculators increased their net long positions in the Gold futures markets, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC). The non-commercial futures contracts of Gold futures, traded by large speculators, hedge funds and retailers, totaled a net position of 296204 contracts in the data reported through 22 October, 2024, up 9770 contracts from the previous week. The net longs are now at three week high. This means that speculative buying has gone up despite a sustained spurt in prices.

Meanwhile, there are signs that Indian demand, which exploded after the import duty cut, may be tapering off. India's Gold imports stood at Rs 4394 crore in value terms in September 2024, up 7% compared to September 2023. Silver imports surged by 376% on year to Rs 325 crore in August 2024. Gold imports fell on a monthly basis, sliding 47% compared to August 2024. Silver imports also tanked by 97% on monthly basis. Gold imports value in first six months of current fiscal rose by 21.78% on year while Silver imports during the same period spiked by 378%. With the spot retail prices zooming near Rs 79000 per 10 grams as compared to around Rs 62000 per 10 grams mark in January this year, local buying could likely retreat once the festive season gets over.