Gold broke above $2,700/oz for the first time amid concerns over escalating tensions in the Middle East and ahead of the US election.
Traders are seeking safety in gold this morning after Israel said it killed Hamas leader Yahya Sinwar, and Prime Minister Benjamin Netanyahu said Israel would keep fighting until all the hostages seized by Hamas last year are free, even though US President Joe Biden said it was time for the war to end.
Gold is one of this year’s strongest performing commodities, with gains of more than 30% so far, supported by rate-cut optimism, strong central bank buying and robust Asian purchases. Safe-haven demand amid heightened geopolitical risks as well as uncertainty ahead of the US election in November have also supported gold’s record-breaking rally this year.
We believe the macro picture combined with safe-haven demand amid an escalation of tensions in the Middle East and the ongoing war in Ukraine will drive gold to new highs.
The US presidential election in November will also continue to add to gold’s upward momentum through to the end of the year, in our view, and is likely to perform well regardless of the election outcome. Central banks are also expected to keep adding to their holdings, which should offer support.
The National Bureau of Statistics (NBS) numbers released this morning show that Chinese monthly primary aluminium production rose 1.2% year-on-year to 3.65mt as more smelters brought back the idled capacity. Ample power supplies in the country could result in further gains in production through the rest of the year. Cumulatively, output increased 4.6% YoY to 32.6mt over the first nine months of the year. Among other metals, monthly crude steel production fell 6% YoY to 77.1mt last month (the lowest monthly total this year) as mill margins continue to remain weak, while real estate demand also remains sluggish. Cumulative output fell 3.6% YoY to 768.5mt in Jan’24-Sep’24.
Meanwhile, trade numbers from Chinese Customs show that China’s imports of unwrought aluminium and aluminium products fell 20% YoY to 270kt in September, while cumulative shipments increased 39.5% to 2.85mt in the first nine months of 2024. For steel products, imports fell by 13.6% YoY to 550kt last month, while cumulative imports fell 9% YoY to stand at 5.2mt in Jan’24-Sep’24. Looking at the exports, the country’s alumina exports jumped 57.5% YoY to 140kt in September but remained unchanged on a monthly basis. Meanwhile, year-to-date shipments increased 33% YoY to 1.24mt in the first nine months of the year.
Steel inventories at major Chinese steel mills rose to 14.7mt in early October, up 3.2% compared to late September, according to data from the China Iron and Steel Association (CISA). However, steel inventories are still 10% lower than in the same period last year. Crude steel production at major mills rose by 1.7% from late September to 2.05mt/d in early October, as more domestic steel mills ramped up production primarily to capitalise on sustained profits.