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Market of the Month - Gold, an overview

By Capital.com Research Team

06:00, 30 September 2024

In 2024, gold has been on an upward trajectory, hitting high after high as global markets face ongoing challenges. This precious metal, long seen as a safe haven, has been proving its worth, drawing attention from traders around the world as its bullish surge continues.

In times of economic uncertainty, gold’s role as a stable store of value has historically often become even more pronounced. Whether it’s inflation fears, geopolitical tensions, or fluctuations in major currencies, gold has been seen as a way to provide a buffer against market volatility – although past performance is not a reliable indicator of future results.

Gold’s key drivers this year

But what are the key factors that have been impacting the gold price in 2024?

Gold

2,644.83 Price
-0.140% 1D Chg, %
Long position overnight fee -0.0177%
Short position overnight fee 0.0094%
Overnight fee time 21:00 (UTC)
Spread 0.30

Natural Gas

2.75 Price
-0.220% 1D Chg, %
Long position overnight fee -0.4867%
Short position overnight fee 0.4648%
Overnight fee time 21:00 (UTC)
Spread 0.0050

Silver

31.15 Price
-0.110% 1D Chg, %
Long position overnight fee -0.0179%
Short position overnight fee 0.0097%
Overnight fee time 21:00 (UTC)
Spread 0.032

Oil - Brent

75.05 Price
-0.270% 1D Chg, %
Long position overnight fee 0.0065%
Short position overnight fee -0.0284%
Overnight fee time 21:00 (UTC)
Spread 0.045
  1. Economic uncertainty and recession fears

    Persistent concerns about a global economic slowdown, particularly in major economies like the US and China, have helped push investors towards safe-haven assets like gold. The uncertainty surrounding economic growth has heightened demand for gold as a store of value.
     
  2. Inflationary pressures

    Despite efforts by central banks to curb inflation, rising prices in essential goods and services have continued to erode purchasing power in 2024. As a traditional hedge against inflation, gold has benefited significantly from these inflationary pressures.


     
  3. Central bank policies and interest rates

    Central banks, particularly the Federal Reserve, took a more dovish stance earlier in 2024, pausing or slowing the pace of interest rate hikes. This has weakened the appeal of interest-bearing assets and strengthened the demand for gold, which often becomes more attractive in a low-interest-rate environment.

    Some central banks have reintroduced or maintained quantitative easing measures to support their economies, which has fuelled fears of long-term currency devaluation and increased gold's appeal as a hedge against monetary expansion.
     
  4. Geopolitical tensions

    Heightened geopolitical tensions, particularly in regions like eastern Europe and the middle east, have driven safe-haven demand for gold. Investors have flocked to gold to protect their portfolios from potential market disruptions caused by these conflicts.
     
  5. US dollar fluctuations

    The US dollar has experienced periods of weakness in 2024, making gold more affordable for investors holding other currencies. This inverse relationship between the dollar and gold has played a significant role in gold's price increase.


     
  6. Central bank gold purchases

    Central banks, particularly in emerging markets, have increased their gold reserves in 2024 as part of their strategy to diversify away from the US dollar. This steady demand from central banks has provided additional support for gold prices.
     
  7. Market sentiment and speculation

    Strong bullish sentiment among investors and speculators has amplified gold's upward momentum in 2024. Expectations of continued economic uncertainty and further monetary easing have driven speculative interest in gold, contributing to its price surge.
     
  8. Technological and industrial demand

    In 2024, technological advancements, particularly in electronics, have increased industrial demand for gold. This has added another layer of support to gold prices, although it’s a smaller factor compared to the macroeconomic drivers.

Past performance is not a reliable indicator of future results. 

Next week, we’ll visualise how and when these factors impacted the gold price over the past year. 

This week’s events:
Event: European core harmonised index of consumer prices: 1 October, 9:00am UTC
Why it matters for gold: While the impact of European figures may be lower than those of the US, higher-than-expected inflation can potentially drive demand for gold as a hedge, while lower figures might reduce its appeal.

Event: US non-farm payrolls: 4 October, 12:30pm UTC
Why it matters for gold: Strong US job numbers might boost the dollar and weigh on gold, while weak employment figures could have the opposite effect.

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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