The Zhitong Finance App learned that the World Gold Council published an article stating that investors are generally concerned about the mutual influence of fiscal pressure, uncertainty about inflation, and the credibility of monetary policy. If bond yields remain high, and the market's expectations for interest rate hikes by major central banks have not changed drastically, it indicates that investors' focus has shifted from short-term policy interest rates to deeper financial risks and term premium risks, and demand for gold may continue to be supported.
In September, the price of gold fell 8.5% month-on-month, closing at 4,176 US dollars/ounce at the end of the month. The rise in US bond yields and the strengthening of the US dollar were the main drivers of the fall in gold prices in September.
Despite the fall in gold prices, gold ETFs in all regions of the world recorded a total net inflow of US$10 billion (67 tons), with North America leading in inflows, followed by Europe and Asia. Meanwhile, futures positions on the New York Mercantile Exchange (COMEX) have shrunk significantly, in stark contrast to strong demand for gold ETFs.
Entering October, the price of gold stabilized around 4,130 US dollars/ounce. The repeated uncertainty brought about by the US and Iran situation affects global investors' expectations for oil prices and inflation. Combined with the release of key US data, it affects changes in market expectations for US dollar interest rate hikes, and is the main factor driving short-term changes in gold prices.
However, global gold ETFs still showed a net inflow trend in the first two weeks of October, led by Europe and Asia. In the UK in particular, demand for UK gold ETFs surged in the third quarter; a simple model predicts an inflow of only 18 tons; the actual inflow was 54 tons, generating an excess inflow of 36 tons.
Traditional macroeconomic relationships cannot explain this excess inflow, but recent changes in trends suggest that fiscal concerns may be an important influencing factor. This also raises a more interesting question: how can investors interpret the signals released by higher bond yields. Some investors may view this round of rising yields as a risk warning rather than a return to healthy normalization of yields.
France and Germany are also showing the same trend. Treasury bond yields and term premiums of the two countries are rising at the same time. However, the inflow trend of local gold ETF funds is relatively moderate. Given the small size of the gold market in France and Germany, investors may choose to allocate gold assets through funds and financial instruments listed in other markets.
Unlike the intense but brief turmoil in the UK market in 2022, this round of European gold ETF capital inflows covered a wider range and was more sustainable. Demand in the UK is particularly prominent, while rising term premiums in other parts of Europe and inflows of gold ETFs reflect investors' general concerns about the mutual influence of fiscal pressure, inflationary uncertainty, and monetary policy credibility.
The October market may verify this logical judgment. French, British, German and US long-term treasury bond maturity premiums continued to rise sharply, along with continued net inflows of gold ETFs, highlighting investors' concerns about government debt.