Gold price rises to new highs, RBA deputy governor says markets were ‘impressively bullish’

The modern gold rush is gaining momentum: prices for the precious metal are breaking records almost weekly.

Bulk gold (or bullion) topped $2,700 an ounce for the first time last week, extending this year’s gain to 31 percent.

“I have to say it’s a little crazy,” said Marcus Today senior market analyst Henry Jennings.

“This is by far one of the best-performing assets this year by a wide margin.”

The precious metal hit a record $4,000 an ounce last week, up a third this year.

There are a number of factors behind the recent gold rush, such as geopolitical events in the Middle East.

Central banks continue to stockpile gold, but purchases have slowed after “record” demand earlier in the year, according to the World Gold Council.

Global investors also appear to be hoarding commodities ahead of the US elections early next month.

“There is also a fear of what will happen… neither candidate has really addressed the growing US deficit: $32 trillion to $33 trillion and rising,” Mr Jennings said.

“It was extraordinary and very optimistic.”

By bullish, he means that many investors are enthusiastic about buying into the market.

But could this be due to a feeling that global financial markets, including equity markets, have gotten ahead of themselves?

Reserve Bank Deputy Governor Andrew Houser says he thinks they may have done it.

“Global financial markets, particularly the stock market, have been remarkably optimistic about the likelihood of a soft (economic) landing, indeed throughout the post-COVID period,” he told a Commonwealth Bank investor briefing on Monday.

The Deputy Governor even gave his personal assessment of the enthusiasm in global financial markets.

“It may well be true, it may well be true, but it’s at one end of the distribution,” Mr. Houser said.

But Mr Jennings believes Wall Street is at least betting on Donald Trump winning the upcoming US election, which is seen as a positive for the world’s largest economy.

“It’s such a strong economy, and we’ve seen that over and over again over the last few weeks in the economic data.”

This leaves something of a financial market paradox – the rising price of gold, which some see as a sign that investors are bracing for a so-called “hard landing” or global recession, along with the idea that the world’s largest economy will continue to perform well .

“It’s inevitable that (financial) markets don’t rise in a straight line forever,” Mr. Jennings said.

But which view is most likely to be overturned remains a matter of debate.

As for the risks associated with the US elections, we will know whether they materialize in the next two weeks.

Meanwhile, IG London chief market analyst Chris Beauchamp believes the gold rush is “showing no signs of slowing down.”

“The recent decline in early October benefited bulls who saw new upside momentum in this strong trend,” he wrote in a note.

However, he expressed some caution.

“A close below $2,685, the September high, could trigger some near-term weakness.”

The price of silver is also proving strong, rising more than 30 percent this year.

It is now trading at its highest level since 2012.