Key events
Talking about the dizzying gold rally, ING commodities strategist Ewa Manthey added:
Uncertainty about the global economy is one of the main drivers, and the US government shutdown isn’t exactly helping sentiment either.
That shutdown has delayed key payroll data, further clouding an already uncertain economic outlook. With official data delayed, traders are relying on private reports for economic insight, while the central bank faces challenges in making monetary policy decisions. Still, markets are pricing in a quarter-point cut this month, which would further benefit gold, as it doesn’t pay interest. Policy uncertainty and growing bets on Federal Reserve easing are keeping safe-haven demand strong.
Investors are adding gold ETFs [exchange-traded funds] at a rapid pace. Last week, gold-backed exchange-traded funds expanded again, taking the total gold ETF holdings to the highest level since September 2022. There is still room for further additions, given the current total remains shy of the peak hit in 2020. More inflows could push gold even higher.
Introduction: Spot gold rises above $4,000 for the first time; car dealer Vertu Motors warns of £5.5m profit hit from JLR disruption
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The price of gold has climbed above $4,000 an ounce for the first time, extending a rally fuelled by worries over political drama in Japan, France and the US, where the federal government shutdown has dragged on.
Spot gold rose by 1.15% to $4,029.46 an ounce, yet another record high, and is up 50% so far this year. This comes after increases of 27% last year and 13% the year before.
The precious metal is seen as a safe-haven in times of turmoil, and also used as a hedge against rising inflation.
The hedge fund billionaire Ray Dalio compared the current period to the early 1970s when soaring inflation and high government debt levels and spending undermined confidence in other assets. Speaking at the Greenwich Economic Forum in Connecticut yesterday, he said:
It’s very much like the early ’70s … where do you put your money in?
Gold is a very excellent diversifier in the portfolio. If you look at it just from a strategic asset allocation perspective, you would probably have something like 15% of your portfolio in gold … because it is one asset that does very well when the typical parts of the portfolio go down.
Investors’ appetite for all things gold seems undiminished. Investors have been piling into gold exchange-traded funds (ETF) with inflows hitting $64bn so far this year, according to the World Gold Council, with a record $17.3bn in September alone. Central banks have also been buying gold.
Expectations of further US interest rate cuts, worries over geopolitical and economic uncertainty, trade tariffs and an AI bubble, along with a weak dollar have driven the gold rally.
Ewa Manthey, commodities strategist at ING, said:
Gold has staged a historic rally, doubling in less than two years, spurred by central bank buying as it diversifies away from the US dollar, President Donald Trump’s aggressive trade policy and conflicts in the Middle East and Ukraine.
Looking ahead, central banks are still buying – the People’s Bank of China extended its gold buying streak in September for an 11th consecutive month despite record high prices – Trump’s trade war is still pressing on, geopolitical risks remain elevated, and ETF holdings continue to expand while expectations of more Fed rate cuts intensify. All of this suggests that gold has still further room to run.
The price of gold futures topped gold for the first time yesterday.
The British car dealership group Vertu Motors has warned of a £5.5m hit to its annual profits from “significant disruption” to its Jaguar Land Rover showrooms after the luxury carmaker paused production for five weeks following a crippling cyber attack.
Vertu’s chief executive Robert Forrester said it was “disappointing for the industry to face major disruption across the JLR network” during September, a key month for car sales as number plates are changed.
Whilst the situation is fluid, it appears to be easing in recent days.
Vertu, which is based in Gateshead near Newcastle, reported record half-year sales of £2.51bn for the six months to the end of August, up from £2.47bn a year earlier. Adjusted pre-tax profit fell by 10% to £20m.
It’s the last day of the Tory party conference in Birmingham. Later today, the International Monetary Fund’s managing director Kristalina Georgieva is due to give a curtainraiser speech ahead of the IMF’s meeting in Washington next week.
The US Federal Reserve will release the minutes of its last meeting, which will shed further light on its thinking, and the wide rift among officials regarding the policy outlook.
The Agenda
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Conservative party conference
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2pm BST: IMF managing director Kristalina Georgieva speech
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4pm BST: Huw Pill gives lecture in Birmingham
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7pm BST: US Federal Reserve minutes of 19 September meeting
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