Gold made it past $2,000 (£1,856) an ounce again this week, and the rise has been accompanied by the industry's increased use of that increasingly outdated term 'FOMO': fear of missing out. The yellow metal has often climbed at this most wonderful time of year, with an average of 4 per cent gains across December over the past six years as per Saxo Bank data.
Traders hoping to ride this move have bought in, sending the price over that all-important level in the process – the highest gold has traded since May. What happens now is partly down to central banks and partly down to the crisis in the Middle East. The price surged from $1,821 an oz on 6 October to $1,984 an oz two weeks later as the risk of an all-out Israel-Palestine war appeared to rise.
Now we’re largely back to the more regular practice of watching moves in the US dollar and Treasury yields. “We believe the risk/reward increasingly favours gold, and that the best is yet to come, but for that to happen investors need a stronger conviction on Fed rate cuts in order to attract fresh demand from [buyers],” said Saxo Bank head of commodity strategy Ole Hansen.
The trader’s approach is divorced from the reason why most investors actually hold the metal, however.
The New York Times reported this week that gold was in high demand in China as a way to smuggle wealth out of the country, including bars “small enough to be scattered unobtrusively through carry-on luggage”.
As of 30 September, bar and coin buying in China had surged by 40 tonnes, or 1.4mn oz year on year, to 197 tonnes – enough to fill a lot of overhead lockers. The Chinese central bank is buying as well, topping the global charts by buying 181 tonnes, worth close to $13bn, in the same period.
The weak point in terms of demand has been institutional investors and retail buyers in North America and Europe. What could turn them is the first rate cut from the US Federal Reserve. Or rumours of it. This time the adage may well be buy the FOMO, sell the rate cut.
