Price Performance Indicators

Gold focus :

1.    ICDX gold price rose 1.63% in a week (23/10 - 27/10).

2.    Middle East conflicts and sentiment from China and China's gold consumption.

Market Review

ICDX gold prices rose 1.63% compared to the previous week with the focus on the emergence of new geopolitical risks that increase demand for safe-haven assets. Boosting sentiment came from one of the main consumers of gold, China, which recorded consumption growth.

The new geopolitical risks emerged after the Hamas militant group in Gaza attacked Israeli cities on October 7, prompting air strikes against Gaza and a declaration of war from Israel. The conflict escalated as Israel's assault on Gaza killed thousands of civilians, drawing worldwide attention and sparking calls for a ceasefire to ease aid to 2.3 million civilians in the besieged territory. Tensions between Israel and Lebanon Hezbollah, triggering a further escalation of the Israeli-Hamas conflict, could spill over into a broader regional conflict that could potentially destabilize the region.

A series of US economic data released ahead of the Fed's meeting at the end of October also became the focus of gold market participants. U.S. Gross Domestic Product (GDP) for Q3 increased by 4.9% versus 2.1% previously, registering the fastest pace of growth in nearly two years. The US Manufacturing PMI jumped to 50.9 from 50.1 in the previous report while the services PMI was at 50.0 from 49.8 in the previous data. The Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation gauge, which excludes food and energy components, grew at an annualized 3.7% in September from a previous reading of 3.8% and in line with market expectations. The overall PCE price index rose 3.4%, matching August's gain.

China, one of the top consumers of gold, recorded that China's gold consumption in the first three quarters of 2023 grew 7.3% from a year earlier to reach 835.07 tons, according to data released by the China Gold Association. The People's Bank of China governor said his policy focus was on increasing domestic demand to promote a sustainable economic recovery. The first meeting of the Economic Working Group tasked with being an ongoing channel to discuss and facilitate progress in U.S.-China bilateral economic policy has been convened. The two-hour virtual meeting discussed domestic and global macroeconomic developments and bilateral cooperation in addressing global challenges. Both sides agreed to continue to maintain communication.

Market View

Geopolitical Development of the Middle East

Israeli attacks targeting hospitals and refugee camps in Gaza have raised international condemnation of an immediate humanitarian pause. The death toll has been recorded at more than 8,000 Gaza civilians in the war that has been going on for more than three weeks. Prime Minister Benjamin Netanyahu reiterated that Israel would not agree to a cessation of war with Hamas in Gaza and went ahead with its plans to annihilate the group. Israel reportedly targeted Gaza's main north-south road and attacked Gaza City from two directions. Gold as a safe-haven asset is generally sought after when there are global geopolitical tensions.

US Central Bank Monetary Policy

In a press conference after the conclusion of the FOMC's two-day policy meeting, Fed Chairman Jerome Powell announced to keep the Fed's benchmark interest rate stable in the range of 5.25% - 5.50%. Powell said the situation remains an enigma, with U.S. central bank officials willing to raise interest rates again if inflationary progress stalls while remaining wary that market-based rate hikes may start to weigh on the economy significantly and trying not to disrupt more than necessary the dynamics of steady job and wage growth. Tighter policy weighs on gold price movements because it is considered less yielding than other financial products that generate interest.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Source: ICDX Research