Gold has risen more than 28% this year, will it continue to rise in October?

Recently, the latest data released by the central bank shows that as of the end of September, China's gold reserves remained at 72.8 million ounces, having not increased for five consecutive months. The central bank continues to hold its position. Will international gold prices continue to soar in October against the backdrop of new highs?

Central Bank Halts Gold Purchases for 5 Months

Since May of this year, the central bank has ended its previous "eighteen-month consecutive increase" in gold reserves, maintaining the scale at 72.8 million ounces. Market analysts point out that given the continuous rise in international gold prices in September, it is clearly not cost-effective for the central bank to buy gold at this time.

From the perspective of global gold market consumption, central banks are not the main players, with their purchases of gold maintaining a long-term proportion of less than 20%, while over 70-80% of gold is purchased by institutions and ordinary consumers. Therefore, although the central bank's gold purchasing behavior has a certain guiding role, it cannot effectively influence the trend of international gold prices.

Middle East Conflict and Fed Rate Cuts Drive Strong Gold Growth

In the third quarter of this year, international gold prices rose by 13.3% overall, marking the largest quarterly increase in over a decade. This year, except for a decline in January, gold prices have shown an upward trend in all other months, especially at the end of September, when gold prices hit new historical highs, with a cumulative increase of over 28%.

The conflict in the Middle East is undoubtedly one of the important factors driving the rise in gold prices. Since the escalation of the Israel-Palestine conflict in October 2023, the gold market has entered a strong upward trend. Although there was some easing of regional tensions during this period, the fundamental issues have not been resolved, leading to sustained high volatility in gold prices.

Additionally, as major developed economies around the world enter a rate-cutting cycle, the Fed's rate cuts are gradually being put on the agenda. Against the backdrop of expectations for a return to loose global monetary policy, gold prices resumed their upward trend starting in July, and after the Fed's rate cut in September, they broke through the $2600 mark, approaching the $2700 threshold.

Is There a "Golden October" After "Golden September"?

Entering October, international gold prices have shown a volatile trend. Influenced by strong non-farm payroll data from the Fed and other factors, gold prices experienced significant fluctuations in the short term. On October 4, spot gold briefly reached a high of $2660 per ounce, but after the release of non-farm data, prices fell by $16. Last night, after the release of the Fed's meeting minutes, market expectations for maintaining interest rates unchanged in November surged, causing spot gold to drop to a low of $2605 per ounce during trading.

Faced with the volatile trend of gold prices, market analysts indicate that there is indeed a risk of adjustment in the short term due to the rapid rise in prices. However, in the long term, geopolitical situations and expectations for rate cuts will continue to influence fluctuations in the gold market. On one hand, concerns over potential escalations in Middle Eastern tensions will serve as a significant support for gold prices. On the other hand, since the Fed initiated rate cuts in September, there are still two rate meetings left this year, and expectations regarding the number and magnitude of future rate cuts will continue to shape the direction of the gold market. Historically, gold tends to show a long-term strengthening trend after the Fed cuts rates.

Moreover, several institutions have pointed out in their reports that during a rate-cutting cycle, the interest rate perspective still supports precious metal prices. Additionally, uncertainties in the U.S. economy, potential risks of secondary inflation, and geopolitical risk aversion continue to provide bullish support for gold prices. Therefore, as long as there is no liquidity crisis, gold remains in an upward trend.

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