Global Market Overview: Gold Rallies Amid Economic Worries

The past week witnessed significant shifts in global financial markets, driven by a combination of factors including US economic data, interest rate expectations, and geopolitical concerns.

Currency and Bond Performance

The US Dollar Index generally weakened throughout the week, declining by 0.31% to close at 98.53. In contrast, US Treasury yields declined, with the 10-year yield breaking below the 4% mark, reflecting increasing expectations of interest rate cuts by the Federal Reserve later this year.

Gold and Silver Rally

Precious metals continued their strong gains, with spot gold hitting new all-time highs for the fifth consecutive day, approaching $4380 per ounce. Silver also surged, briefly exceeding $54 per ounce, reaching its highest level ever. Factors such as escalating global risk aversion, US credit risk events, and the strengthening of interest rate cut expectations contributed to this surge. Despite a sharp dip on Friday, gold and silver still recorded weekly gains of nearly 6% and 3.5% respectively, closing at $4247 and $51.73 per ounce.

Non-US Currencies and Oil

Non-US currencies benefited from the weaker dollar, with the Euro, British Pound, and Japanese Yen all recording gains against the dollar. The USD/JPY exchange rate fell from its eight-month high, dipping below 150, due to increased demand for safe-haven assets. Crude oil prices experienced a notable decline for the third consecutive week, driven by IEA warnings about a potential global supply glut by 2026 and escalating trade tensions.

US Stock Market Performance

US stocks generally fluctuated, with mixed performance. The Dow Jones Industrial Average rose 1.56%, the S&P 500 Index gained 1.7%, and the Nasdaq Composite Index advanced 2.14%. However, concerns about credit quality due to the disclosure of loan fraud and bad debts at two US regional banks triggered a sharp decline in the regional bank index. This resulted in a loss of over $100 billion in bank market capitalization.

Key Economic Events

The week also saw a number of key economic events, including statements from Federal Reserve Chair Jerome Powell regarding interest rates and inflation, the US federal government shutdown, and the disclosure of loan fraud at US regional banks.

Investment Bank Recommendations

Several investment banks have adjusted their price targets for gold. ANZ Bank expects gold to peak at $4600 by next June. Bank of America has raised its gold price forecast for next year to $5000 per ounce. Societe Generale believes that gold will reach $5000 before the end of 2026.

Conclusion

In summary, the past week was eventful in global financial markets, with significant gains in gold, declines in oil prices, and fluctuating US stocks. It remains to be seen how these developments will impact markets in the weeks to come.