In July 2024, gold price was up 5.2% m/m- Galt&Taggart review reads.
Combination of geopolitical uncertainties (Trump shooting, escalation in the Middle East), favorable economic indicators (US inflation data, Fed rate cut optimism), and heightened rush to the safe haven pushed gold price above another record high in July.
Trump shooting spurred traders into “Trump Trades”, a common name for the trades that would benefit by Donald Trump retaking the office in November elections. Before Joe Biden dropped out from the presidential race, many thought the attack on Trump and the iconic picture that emerged from it would almost guarantee the former president his election win. Therefore, investors rushed to assets that would gain from Trump presidency. Notably, per Bloomberg survey, gold is the best portfolio hedge in case Trump retakes the White House. Later in the month, when Kamala Harris emerged as the potential replacement of Biden, Trump Trades subdued. However, the demand for gold remained strong amid other global risks and uncertainties, primarily driven by Middle Eastern conflict. As discussed on page 3, prospect of wider war in the Middle East flocked investors to safe assets, primarily gold.
Along with the global risks, macroeconomic factors played a favorable role for the prices. Softening US inflation created a hope for a Fed rate cut as early as September. Traders closely watched the outcome of the latest Federal Reserve meeting and looked for any clues of upcoming cuts. There was no need for much looking as Jerome Powell openly confirmed the cut may happen in September if the economy follows its expected path. Later US jobs report data showed weaker figures than expected, creating worries about possible recession and translating into global stock selloff. Consequently, analysts expect three rate cuts by December 2024, two of which likely to be 50bps.
World Gold Council (WGC) released its quarterly recap of the market, according to which, over-the-counter (OTC) transactions of gold were up 53% y/y, reaching 329 tons in 2Q24. Figures hint at rise in interest coming from the wealthy individual investors who purchase physical gold with the primary goal of anonymously diversifying risks. Notably, flows into gold-backed ETFs (exchange traded funds) have also turned positive in recent weeks- the review reads.
