The gold price rally of 2024 hit new highs over the month of September, notching new records on eight separate occasions, according to the World Gold Council.
In its latest market outlook, it observed gold posted a healthy gain over the month, lifting 4.6 per cent to sit at US$2,630 by the end of September.
At its peak on 26 September, the price rose to a record $2,685 per ounce.
This “stellar” month, the WGC said, saw the price pulled higher by a further drop in the US dollar as the Fed commenced its easing cycle with a 50 bps rate cut.
“Also of note in September, rising geopolitical tensions in the Middle East that have continued into October, helped the gold rally,” it said.
Looking ahead, it highlighted strong potential for a “gold-friendly environment”.
“Two years after both equities and bonds lost value – the first time this had happened for 53 years – the two continue to be highly correlated although at least they are now going in the right direction … so far in 2024, both are up. While investors stand to gain, this high correlation undermines diversification benefits and raises total portfolio risk,” it said.
This correlation looks to stay on this track, adding to the appeal of gold as a hedge and diversifier as investors seek new avenues for diversification.
Moreover, following the US Fed’s jumbo cut, it said the next chapter in the global macro narrative “should involve broad and substantial rate cuts, which should be supportive of risky assets”.
“It is worth noting that gold stands to benefit. It has historically returned an average of 6 per cent in the six months following the start of rate cutting cycles,” it said.
Gold ETFs extend hot streak
In a separate report, the WGC said global gold ETFs extended their inflow streak over the month of September, attracting US$1.4 billion.
Thanks to continued inflows and a record-breaking gold price, the WGC found global assets under management lifted by 5 per cent to US$271 billion, marking another month-end peak.
Continuous inflows in recent months also trimmed year-to-date outflows of ETFs to flip positive to $389 million.
Looking at gold ETF performance over the month, inflows were concentrated in North America, the WGC observed.
“The US Fed surprised investors with a cut of 50 bps at their September gathering, pushing Treasury yields and the dollar down during the month,” it said.
“Lower opportunity costs, related to interest rates and the dollar, boosted investor interest in gold ETFs.”
Rising geopolitical tensions in the Middle East also contributed to some safe haven flows, it said.
Australia, along with South Africa, was also named a main driver of the month’s inflows, recording US$109.8 million in fund flows in September, while holdings rose to 43 tonnes.
“Although the Reserve Bank of Australia held rates unchanged, local yields were generally lower in the month amid cooling inflation and weak growth,” the WGC said.
“Alongside the record-breaking gold price in the local currency, Australian gold ETFs have now registered inflows for four consecutive months.”
Asian funds also extended their inflow streak to 20 months, attracting US$175 million, as strong gold price momentum and elevated geopolitical risk contributed to interest.
The WGC noted Europe was the only region that experienced outflows against gold’s price rally, albeit only mildly.
“Outflows were mainly from UK funds. Compared to the US Fed’s easing efforts, the Bank of England was more reserved, leaving rates unchanged at 5 per cent at their September meeting, citing the upside risk of inflation from elevated wage growth,” it said.
“The BoE’s cautious move cooled investor expectation of future rate cuts and fuelled a sizable rebound in UK gilt yields which coincided with major local gold ETFs’ outflows.”
Meanwhile, intensifying expectations of a further cut from the European Central Bank in October, despite a pause this month, contributed to notable falls in local yields, and likely contributed to increased gold demand in other markets like Germany and Switzerland, which witnessed inflows.
Global gold trading volumes rebounded in September, up 7 per cent month-on-month to average US$259 billion. The main driver, the WGC said, came from over-the-counter activities.
