12/12/24 10:25:58

Commodities: “Gold price on the verge of another record high”

Gold, gold and more gold - almost everything in ETC trading revolves around the most important precious metal. Some people are predicting a gold price of USD 3,000 in 2025, while business with energy and industrial metal ETCs is rather quiet. 


12 November, 2024 FRANKFURT (Frankfurt Stock Exchange). Record sentiment not only on the stock markets - the price of gold is also heading for a new all-time high. In October, the price had risen to 2,789.52 US dollars per fine ounce, but then fell back to below 2,600 US dollars. On Thursday morning, it is back at 2,717 US dollars.

Quite a few expect even higher prices. “The precious metal is likely to rise to 3,000 US dollars by the end of 2025,” explains Lina Thomas from US bank Goldman Sachs. The reasons for this are the ongoing uncertainty regarding inflation and geopolitical risks. This makes people turn to gold as a hedge. However, gold purchases by central banks, especially those from emerging markets, are crucial. The precious metals company Heraeus is also confident and expects gold prices of up to USD 2,950 in 2025. “The likely further increase in US government debt is likely to lead to higher inflation and a weaker US dollar,” it says.

The trading and analysis company Crossflow points out that even after the sharp rise, the gold price is only slightly above its all-time high of 1980 in US dollar terms, adjusted for inflation. Crossflow also names the central banks as an important player. “It can be assumed that central banks will continue to demand gold,” it says. The gold reserves of the world's central banks are still at a historically low level.

“Probably profit-taking”

Trading in commodity ETCs on Xetra is currently dominated by gold. Xetra Gold (DE000A0S9GB0) in particular is experiencing high turnover, as are Invesco Physical Gold (IE00B579F325), iShares Physical Gold (IE00B4ND3602) and Xtrackers Physical Gold (DE000A2T0VU5). Some money is also being invested in silver ETCs, such as WisdomTree Physical Silver (JE00B1VS3333). However, Mobeen Tahir from WisdomTree reports high outflows from gold ETCs over the past four weeks. “Investors probably took profits,” notes Tahir. Xetra-Gold holdings have fallen to 166 tons in recent months. At the end of 2023, it was 199 tons, at the end of 2022 231 tons.

High outflows from gold ETCs in 2024

Some people will be annoyed by the gold price trend, as gold ETCs have been sold on a grand scale this year. According to the analysis and trading company Crossflow, 6.9 billion euros have flowed out of European commodity ETCs since the beginning of the year, almost all of it gold ETCs (6.5 billion euros). “European gold certificates continue to lose investment volume after a brief stabilization phase. In November alone, assets worth 1.6 billion euros were lost,” writes Crossflow. Energy and industrial metal ETCs also recorded outflows in November and since the beginning of the year, although at a much lower level. 
 

US oil production could dampen oil price

The price of oil is currently at the lower end of this year's price range. A barrel of North Sea Brent crude costs $73.80 on Thursday morning. At its high in April it was over $92, at its low in September just under $69. “The markets feared that the new Trump administration would be much friendlier to the oil and gas industry in the US and increase supply,” notes Tahir. Higher oil production in the US could contribute to the already significant global overcapacity. However, as Barbara Lambrecht from Commerzbank emphasizes, the price trend on the oil market is also determined by demand prospects. “The disappointing development in Chinese demand for oil has weighed noticeably on the oil price,” explained by an analyst.

Oil ETCs were also mostly on the sell-off lists, as WisdomTree reports, although to a much lesser extent than precious metal ETCs. 
 

Industrial metals: suffering under Trump?

Important industrial metal ETCs such as WisdomTree Industrial Metals (GB00B15KYG56) and WisdomTree Copper (GB00B15KXQ89) have been moving sideways for several months. The highs from May have not been reached, but there has still been a significant gain since the beginning of the year. 

Background to the recent sideways movement: Fears about the economic impact of US President Trump's trade policy, which could slow down global trade and weaken demand, as Tahir notes. “Concerns about reduced support for green initiatives and China's inadequate fiscal stimulus have added to the pressure.” For industrial metals ETCs, WisdomTree reports smaller outflows for the past few weeks. 
 

(Almost) only precious metals 

On the Xetra turnover list for ETCs for November, only gold and silver products rank in the top 15 places. As always, Xetra-Gold is the top performer. It is followed by iShares Physical Gold, Xtrackers Physical Gold EUR Hedged, Invesco Physical Gold and Xtrackers Physical Gold. Silver price trackers, such as those from WisdomTree and Xtrackers, also saw strong turnover. The first oil/gas ETC on the list is the WisdomTree WTI Crude Oil in 16th place, while the first industrial metals ETC is the WisdomTree Industrial Metals in 20th place.

By Anna-Maria Borse, 12 December, 2024, © Deutsche Börse

Anna-Maria Borse is a financial and trade editor specializing in the financial market/stock exchange and economic topics.

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