The record gold rally of the past few months “may have peaked in trendiness”, a top investment bank has predicted despite the precious metal hitting fresh highs on Monday fuelled by Donald Trump’s threat last week to upend trade with China.
Deutsche Bank said that while it was not predicting “an impending correction”, the length and intensity of the yellow metal’s upturn has made a “period of more neutral behaviour” more likely.
“The gold rally of September-October may have peaked in trendiness,” Deutsche Bank analyst Michael Hsueh wrote in a note. “Trending episodes… have lasted on average for 19 days in the past three years, so the current episode of 29 days (and counting) is longer than median and average.”
Fears over western governments’ ballooning debt piles and a flurry of political crises helped carry the price of gold past $4,000 per troy ounce last week, little more than six months since it cleared $3,000 for the first time in March.
The spot price of the precious metal – a safe haven asset traditionally used as a hedge against inflation – has risen more than 22 per cent since August, alongside striking gains to bitcoin and other cryptocurrencies. The rally has been dubbed the ‘debasement trade‘ by some, because of fears among investors that governments will look to devalue their currencies as a means of inflating away debts.
Political crises accelerate gold rally
Fuel has been added to the rally by the ongoing political crisis in France, which saw the country lose its prime minister less than 24 hours after his cabinet had been appointed, and the extended government shutdown in the United States. Japan is also poised to appoint a pro-stimulus Prime Minister who has previously called for the country’s central bank to lower interest rates, a traditional tailwind for gold.
And the rally was given further momentum when Donald Trump threatened to unleash fresh tariffs of 100 per cent on all imports from China on Friday, after President Xi Jinping chose to tighten rules on the country’s exports of rare earth minerals. And even though the US President sought to cool rising tensions in a Truth Social post on Sunday, the yellow metal’s spot price continued to make gains on Monday.
Deutsche Bank said the most recent spurt in gold, which was trading at just over $2,000 per troy ounce as recently as the start of 2024, was likely to tail off as the rally runs out of steam.
But Hsueh added that any slowdown would not necessarily “signal an impending correction”, saying tracker fund data showed “investors reducing purchases in the last week, but not selling”.