Gold is stuck but it's far from a boring market

[View this email in your browser]( [Youtube]( [Kitco Metals]( Editor's Picks [@neils_C]( Okay, the [gold market]( is stuck in some extremely sticky mud and prices are churning between $1,900 and $1,980 an ounce; while trading this market is difficult, if you think it is boring, then you haven’t been paying attention. The first surprising thing about gold is that prices haven’t broken down below $1,900 an ounce. Despite the Federal Reserve’s hawkish stance on monetary policy, bond yields above 4% and the U.S. dollar index near a six-month high above 105 points, the gold market has been able to hold above the August lows. One significant reason why gold has been able to withstand the onslaught of higher yields and the U.S. dollar is because central banks continue to be substantial gold buyers. According to preliminary data from the World Gold Council, [Poland, Czechia and India all extended their months-long buying spree in August](. The National Bank of Poland is the third biggest gold buyer this year behind Singapore and, of course, China. Last month’s purchase comes after global reserves increased by 55 tonnes in July. It is difficult to be bearish on gold when there are significant buyers in the marketplace and the growing de-dollarization trend means demand is expected to remain healthy for the foreseeable future. According to commodity analysts at JPMorgan, [central bank demand has driven investors to allocate the largest percentage of their portfolios to the precious metal since 2012](. Although overall investment demand has been lackluster at best through 2023, there are pockets of the market that continue to grow and attract capital. This week, [the CME announced it would launch options on its micro gold and silver futures]( it has seen significant demand growth in the last ten years. According to trade data, the CME said that its micro gold futures have seen average annual volume growth of 58% since the contracts were launched a decade ago, while micro silver futures have seen volumes increase 93%. Finally, it appears that it’s really only Western investors who are shunning gold. Asian investors see solid value in the precious metal and appear to be willing to pay higher premiums to protect their purchasing power. In Japan, spot gold continues to trade at record highs against the yen. At the same time, for the first time ever, Japanese consumers are paying more than ¥10,000 for one gram of gold. Japan is also not alone. Thursday, [the premium between gold on the Shanghai Gold Exchange vs. Comex futures broke social media as it hit a record high above 6%.]( According to analysts, the Chinese market is seeing a perfect storm as the Chinese government curbed some gold imports into the country while demand remains fairly robust. Similar to what is happening in Japan, Chinese consumers are buying physical gold to protect their purchasing power as new easing measures from the People’s Bank of China weaken the yuan. Finally, the other factor that is supporting gold, according to a growing chorus of analysts, is that global monetary policies are close to running their course. [The Federal Reserve meets next week and while it is expected to keep interest rates unchanged]( Jerome Powell will maintain his hawkish posturing. However, the longer central banks keep interest rates aggressively elevated, the more economic risks grow. That is it for this week. Have a great weekend Neils C. 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