Gold: The Benchmark for Geopolitical and Economic Tensions
In October, gold reaffirmed its status as a safe-haven asset by posting a notable gain of 4.2%, reaching $2,744 per ounce. This rise reflects not only the dynamics specific to the precious metals market but also the complex interplay between geopolitical tensions, political uncertainties, and global economic developments.
A Safe-Haven Asset Amid Global Uncertainties
Geopolitical crises often provide fertile ground for gold’s appreciation, and October was no exception. Rising tensions in the Middle East, particularly between Israel and Hezbollah, prompted investors to seek safe havens amid growing risks. Gold, traditionally viewed as a shield against instability, saw its price climb as conflicts intensified.
Let’s take a concrete example: On October 10, the markets reacted to both U.S. economic data and the resurgence of tensions in the Middle East. In just a few days, the price of gold rose from $2,688 to a high of $2,788 on October 30. This volatility illustrates the precious metal’s sensitivity to events that undermine international stability.
The Role of Economic Dynamics
Although gold performed well in October, it had to overcome significant headwinds:
• A Rising Dollar: The U.S. dollar gained 3.2% in October, driven by strong economic data and the weakness of rival currencies such as the euro and the yen. However, a stronger dollar makes gold more expensive for foreign buyers, reducing demand for it.
• Rising bond yields: The yield on 10-year U.S. Treasury bonds reached 4.3%, its highest level since July.
This increase raises the opportunity cost of holding gold, an asset that does not pay interest.
Despite these headwinds, gold has managed to capitalize on rising political uncertainty in the United States, fueled by a polarizing presidential campaign and expectations of changes in monetary policy.
Demand driven by financial products
Another key factor behind gold’s performance is the positive inflows recorded by gold-backed exchange-traded products (ETPs). For the first time since 2022, these funds recorded net inflows in the third quarter, reflecting renewed interest from institutional and retail investors.
One figure speaks for itself: 1,313 metric tons of gold were consumed in the third quarter of 2024, a record for this time of year. This shows that, beyond speculators, gold continues to attract investors seeking to diversify their portfolios in the face of economic and geopolitical risks.
Gold in the Historical Context of Crises
To understand gold’s enduring appeal, it is helpful to view it from a historical perspective. In 2008, during the global financial crisis, gold also surged, rising from $800 to over $1,000 per ounce in just a few months. Investors, concerned about the stability of the banking systems, turned en masse to this tangible asset.
Today, the motivations aren't all that different. Faced with a combination of high interest rates, rising public debt, and geopolitical tensions, gold continues to be seen as a safeguard against the unexpected.
What Are the Challenges for the Future?
As 2024 comes to a close, several factors could continue to influence the gold market:
1. Federal Reserve decisions: The possibility of a cut in key interest rates in 2025 could ease pressure on gold by making bond yields less attractive.
2. U.S. economic policies: The outcome of the presidential election could shape expectations regarding the dollar and inflation, two key factors for gold.
3. Geopolitical tensions: The situation in the Middle East and Ukraine remains a major concern. Any new episode of destabilization could boost demand for gold.
Gold continues to play a central role in investment strategies for both institutional and individual investors. Its ability to withstand economic pressures while benefiting from uncertainty makes it a valuable barometer of global concerns.
