On Thursday (October 26th), the US GDP growth in the third quarter surged, far exceeding expectations, leading to a continued surge in the US dollar index. Investors' sentiment towards the US dollar rose, suppressing the upward trend of gold. However, the situation in the Middle East still worries investors, with risk aversion remaining and gold prices still showing an upward trend. It is worth noting that as the October rally continues, gold's performance in 2023 will officially outperform stocks.
Spot gold rose 0.28% (or $5.5 per ounce) to close at $1984.82 per ounce.
The December gold futures market, with the most active trading on the New York Mercantile Exchange, rose by $2.5 per ounce to close at $1997.4 per ounce, or 0.13%.
Market News Analysis
On Thursday, gold prices continued to strengthen, and the demand for traditional safe haven assets helped offset the joy of economic recovery to a large extent.
From the trend of gold prices, it can be analyzed that investors still have concerns about the potential escalation of the war between Israel and Hamas. Although US dollar and treasury bond bond yields soared in overnight trading, this still kept the safe haven demand for gold optimistic.
However, although gold is subject to some hedging demand, it is also affected by US economic data. The significant rebound in US GDP data in the third quarter has improved investors' risk appetite, but it is also expected to provide more space for the Federal Reserve to keep interest rates at higher levels for a longer period of time. The US data released on Thursday is the first estimate of GDP for the third quarter, with an overall year-on-year growth of 4.9%, slightly stronger than expected, and an expected growth of 4.7%, compared to the 2.1% growth in the second quarter. However, the inflation data in the GDP data is moderate, which to some extent alleviates the bearish impact of overall good data on precious metal prices.
Federal Reserve officials have opened the door to raising interest rates at least once this year and have stated that in the context of inflation stickiness and strong economy, interest rates will remain high for a longer period of time. Given that higher interest rates have pushed up the opportunity cost of investing in gold, it will squeeze the upward space for gold. Any potential downgrade of the war between Israel and Hamas may also weaken the safe haven demand for gold.
The global demand for precious metals is driving away other alternative assets, "said Ruth Crowell, CEO of the London Bullion Market Association (LBMA). The available industry data for the first two quarters of 2023 shows that gold demand has reached record levels, "Crowell said in an interview with the Nasdaq Trade Talk Newsletter. Although the demand in the first quarter was much stronger than in the second quarter
According to official news, due to the October rally, gold prices will officially outperform the S&P 500 stock index in 2023, reaching the $2000/ounce mark, a level never seen since May. According to Dow Jones market data, as of Thursday's close, the S&P 500SPX index has risen 7.8% since January 1st, while gold futures have risen 9.2% during the same period.
Brien Lundin, editor of Gold Communications, said in a monthly outlook shared with MarketWatch: "The conflict between Palestine and Israel has had an impact on the world and led to a surge in gold prices
Economists at HSBC reported that gold may be on the defensive in the short term unless political risks escalate due to the dual impact of the rise in US treasury bond bond yields and the strengthening of the US dollar. The increase in political risk may help maintain gold prices, and we do not believe that this rebound can continue in the short term. Oil prices have fallen for three consecutive days, which may be crucial because if oil prices fall, it is difficult to imagine a significant increase in demand for gold driven by political risk
Focus on financial data and events on Friday (Beijing time)
① 20:30 Monthly rate of personal expenses in September in the United States
② 20:30 US September Core PCE Price Index Annual and Monthly Rates
③ 22:00 Final Value of the University of Michigan Consumer Confidence Index for October in the United States
④ 22:00 Expected one-year inflation rate for October in the United States
⑤ The total number of oil drilling operations for the week from 01:00 the next day to October 27th in the United States
