Impact of US borrowing and central bank policies on the gold market
Although it lost value in September while maintaining its strong stance, gold is preparing for a new era driven by US debt refinancing and central bank reserve policies.
While gold prices continued to show resilience against rising interest rates despite losing value in September, the US debt burden and central bank policies are shaping new scenarios in the market.
Decline in September and Current Status
Although the ounce price of gold dropped to a 2-month low on Wednesday, it closed the week positively with low-level buying. Ounce gold is at 4,194 dollars, while gram gold is at the 6,644 level. Falling by 6.31 percent in September to 4,157 dollars, gold completed the third quarter with a 3.73 percent gain.
Gold Remaining Strong Despite Interest Rates
According to global asset management company Sprott Asset Management, the most striking development was that gold remained stronger than expected despite rising interest rates. The US 10-year Treasury yield increased by 49 basis points in September, approaching 3 percent, which was recorded as one of the largest monthly increases in the last 25 years.
US Debt Burden and Refinancing
According to Sprott, the US's growing debt, budget deficits, and central bank reserve policies are affecting the demand for gold. Of the US's 40.2 trillion dollars in federal debt, 10.5 trillion dollars will be refinanced at higher interest rates over the next 12 months.
Central Bank Reserve Policies
Central banks' interest in physical gold helps prices find support in a high-interest environment. In this context, France has gathered its gold abroad in Paris, and the Netherlands has also transferred a portion of its reserves from North America.
Possible Scenarios Awaiting the Market
According to Sprott, there are two different paths ahead for gold; if the US economy remains strong and high real interest rates are sustainable, the pressure on gold may continue. However, if high interest rates weaken growth and force the Fed to change policy, the picture could completely reverse.
Silver's Third Quarter Performance
A similar fluctuation was experienced in the silver market in September. Although silver fell by 9.24 percent in September to 60.43 dollars, it managed to close the third quarter with a 3.12 percent increase.