Gold started the week on a high amid a surge in demand driven by escalating tensions in the Middle East and uncertainty over the looming US election. The yellow metal has managed to maintain its position above the $2700 level, consistently reaching higher highs due to robust market demand.
Israel vs. Iran Factor
Concerns that Israel is poised to attack Iran are the latest catalyst pushing the safe haven to record highs as a hedge against soaring geopolitical tensions. While the US has urged Israel to consider cease-fire negotiations in the region, Israel hard-liners are opposed to any concessions and are pushing for an attack on Iran.
President Joe Biden has already made it clear that it is time for the war to end, even as Prime Minister Benjamin Netanyahu insists Israel would not stop fighting until all of the hostages taken by Hamas last year were released. Investors usually look to gold for protection during economic and geopolitical unpredictability periods.
In addition to the geopolitical tensions in the Middle East, gold’s upward momentum is fuelled as investors position their portfolios ahead of next month’s US election. Reports that the upcoming election would be the closest in recent years pitying Donald Trump and Kamala Harris is fuelling a wave of uncertainty, forcing investors to seek safety in the safe haven.
Interest Rate Cuts
The Uncertainty in the Middle East and the upcoming US election are some factors that have fuelled the 30% gain in gold year to date. Likewise, the upward momentum has also received a boost from reports that the US Federal Reserve is poised to carry a 25 basis point interest rate cut next month after a 50 basis point cut last month. Talks about interest rate cuts are increasingly fuelling dollar weakness, helping offer support to higher gold prices.
Following the US that reduced bets on the extent of Federal Reserve easing, haven demand outweighed macro headwinds that would typically weigh on the precious metal. The economy is far from entering a recession, as evidenced by the unexpected decline in jobless claims and the stronger-than-expected retail sales in September. Generally, non-yielding gold is under pressure in higher interest-rate environments.
Costco Gold Sales
Meanwhile, gold is flying off the shelves at Costco Wholesale Corp. stores across the United States despite the spectacular price rise to record highs this year. By providing lower prices than traditional precious metals dealers and additional benefits for its most devoted customers, Costco’s one-stop shopping convenience is making gold purchasing accessible to the general public.
Consequently, gold buyers are turning to the warehouse to purchase the precious metal, given its allure as a safe haven and inflation hedge. Costco is seeing a surge in sales as there are indications that struggling Americans are taking advantage of the gold market’s surge.
Sellers have flooded into New York’s jewelers and pawn shops. According to US Mint data, sales of American Eagle gold coins, a stand-in for retail purchases, fell 64% from January to September compared to the same period last year. The head of metals strategy at Geneva-based MKS PAMP SA, Nicky Shiels, stated that Costco is the “one bright spot” in the consumer gold-buying market.
