OSE Derivatives

Fresh highs in September

Following strong monthly increases in July and August, gold posted another healthy gain in September to finish 4.6% higher at US$2,630/oz. It etched new highs eight times, with the latest one falling on 26 September before a very marginal decline into month end (Table 1).

According to our Gold Return Attribution Model (GRAM), gold was pulled higher by a further drop in the US dollar as the Fed embarked on its rate-cutting programme with a somewhat surprising 50bps cut (Chart 1). And similar to last month, the main identifiable negative contribution came from a momentum factor: the gold return in the previous month, which, when high, has a tendency to pressure the following month’s return lower. And vice versa.

Also of note in September, rising geopolitical tensions in the Middle East that have continued into October, helped the gold rally. And global physically-backed gold ETFs extended their inflow streak to five months. North American funds contributed the lion’s share of flows.

The full report by World Gold Council can be viewed here.