According to the World Gold Council, the yellow metal made further gains in October, finishing up 4 per cent higher at US$2,734.
Moreover, continued inflows and the “record-shattering gold price” lifted global assets under management a further 5 per cent to another month-end record of US$286 billion.
However, much of gold’s price action occurred during the late Asian and early European trading hours, indicating that Asian market participants played a significant role in driving October’s rally.
“This, at least, partly explains the increasingly frequent disconnect between gold’s return and its usually reliable – yet US-centric – short-term drivers of rates and the US dollar. A risk premium ahead of US elections was also a likely driver,” the council said.
“Yield- and FX-related opportunity cost factors were a drag on the price alongside momentum, with only risk and uncertainty – and the ever-present economic expansion – contributing positively to its return, via a combination of higher breakeven inflation and geopolitical risk.”
Meanwhile, global gold exchange-traded funds (ETF) experienced further inflows in October, adding US$4.3 billion over the period and extending their inflow streak to six months.
Australian gold ETFs attracted US$49.5 million in October, the fifth consecutive monthly inflow, tipping total assets under management to US$3.6 billion.
“In Australia, the weakening Aussie dollar enlarged gold’s return locally and likely pushed up investor currency hedging needs, contributing to the region’s fifth consecutive monthly inflow,” the World Gold council said.
“But North American inflows (30 tonnes as of 31 October) were more than offset by COMEX futures positions, which pared 40 tonnes over the month,” it added.
According to the trade association, this lends credence to the idea that “October was mostly an Asia story”.
Namely, Asian funds attracted US$2.1 billion in October, extending the region’s inflow streak to 20 months.
“China dominated inflows: the record-shattering local gold price and amplified equity market volatility, following a sizable rally in late September fuelled by aggressive stimulus announcements, led to the strongest monthly inflow on record.
“Meanwhile, Indian gold ETF inflows continued, driven by similar factors: attractive gold price momentum, higher stock market volatility, and the lingering positive benefit of adjustments to the long-term capital gains treatment of gold.”
Higher highs
The World Gold Council highlighted that the commodity has posted 39 new all-time highs in US dollars this year, second only to the 57 seen in 1979.
March, September and October led the charge for the largest number of new highs.
“These may be throwaway statistics to some but they often matter in driving media coverage and sentiment: who doesn’t like reading about records being broken?” the council said.
However, it added there are some noteworthy differences this time around.
“For one, previous record-setting years have been accompanied by strong investment demand. Gold ETF inflows in Western markets are very late to the party this year, and retail investment demand has not picked up much either.”
“Furthermore, media fervour is not as visible today as it was during 2020 when gold made its first new all-time-highs for nigh-on a decade, suggesting perhaps that this time, sentiment has not gotten carried away.”
