Over the past two weeks, gold has been setting new historical highs. On October 18th, gold spot prices broke through the $2,700 mark in one go, closing the week at $2,720. Since breaking through the $2,500 mark in September, the rise in gold prices has been sharp.

Recently, the probability of the Republican presidential candidate, Trump, winning the election has increased. Goldman Sachs believes that the recent inflow of funds into gold ETFs is for repositioning portfolios before the U.S. election. Regardless of the election outcome, gold prices may rise further due to the gradual decline in global interest rates and the structural increase in central bank demand. If Trump wins, gold prices may rise further, due to risks such as potential threats to the independence of the Federal Reserve and geopolitical risks such as tariffs.

It is worth mentioning that silver, which has more industrial attributes, has seen a stronger increase in the past week. Spot silver broke through the $33 mark on October 19th for the first time since December 2012. The price of silver increased by up to 6% that day, mainly driven by demand for safe-haven assets and expectations of economic stimulus in China.

Adding to gold to cope with uncertainty

If in the past, gold prices were supported by interest rate cuts, geopolitical risks, and central bank gold purchases, the recent rise in gold prices cannot ignore the changes in the U.S. election situation.

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On October 18th, gold prices reached a new high of $2,696, up 1% from the beginning of last week, and continued to break through the $2,700 mark last Friday. Traders say this is mainly due to inflows of ETF funds, with institutions beginning to rebalance their portfolios before the U.S. election. Recently, Trump's support rate has risen significantly, and the market is increasingly convinced that Trump will win the U.S. election next month. The cryptocurrency prediction market platform Polymarket shows Trump with a 60% win rate against Harris's 40%, leading by a large margin. However, these accounts are held by multiple people or the same person, and not all are Americans.

Nevertheless, UBS told reporters that the two candidates are evenly matched, and it is expected that uncertainty and volatility will rise until the next U.S. government is settled.

In addition, geopolitical influences have also heated up recently. Many people interviewed by reporters mentioned that compared to interest rate cuts, the strongest short-term driver of gold prices is undoubtedly geopolitical risks. After Israel announced the killing of Hamas leader Yahya Sinwar, the market is worried that the Middle East conflict will further escalate. Although U.S. President Biden said that it is time to end the war, Israeli Prime Minister Netanyahu recently said that Israel will continue to fight until all the hostages captured by Hamas last year are released.

In the coming period, a series of factors will continue to support gold prices. Wellington Investment Management mentioned to reporters that among commodities, they mainly看好 gold and crude oil. Gold prices will continue to be supported by policy interest rate cuts in 2025, which usually brings more demand for gold. Central bank purchases of gold remain strong, and retail gold demand in China and India have increased under the stimulus of tax优惠政策.

As early as September, First Financial Daily reported that gold rising to $3,000 seems to be just a matter of time. Since the third quarter, the momentum of gold prices has led many Wall Street investment banks to raise their target prices. Most institutions have given a target price of $2,700 within the year or the first half of next year, and there are also many institutions calling for $3,000. That is, from the beginning of September to now, in less than two months, gold has climbed nearly $200.For gold, a non-income-generating asset, the global central banks' interest rate cuts undoubtedly highlight its value. In addition, the trend of central banks buying gold is crucial. In fact, the market has already priced in the interest rate cuts by the Federal Reserve. The decoupling of gold prices and interest rate trends this year has been entirely driven by central banks' gold purchases. Although the People's Bank of China has paused gold purchases since May, India's gold imports hit a record high in August. This was particularly driven by India's announcement in the union budget on July 23rd to reduce tariffs from the original 15% to 6%, which boosted import demand.

However, a correction in the near term cannot be ruled out. "Before the release of the U.S. CPI, gold prices experienced a correction, and another short-term correction occurred after the release of the better-than-expected data, but it continued to break through before. On October 18th, the bulls once again rushed to the previous high of $2685, and then retreated to the first support point of $2670. After that, another new high was set." Stanley, a senior market strategist at Gain Capital Group, told reporters.

"We have seen the bulls take profits near $2700, which has prompted the next correction. In this case, the previous high of $2685 will become a key support point. If this point is breached, and profit-taking accelerates further, then $2675 or $2667 will become the focus. But in the medium to long term, gold prices still tend to rise." He said.

Chinese stimulus policies push up silver prices

After a long period of silence, silver has also begun to explode, with last week's gains even surpassing gold.

On October 18th, during the U.S. trading session, spot silver broke through the $33 mark for the first time since December 2012. By the close, the silver price had expanded its gains to 6.18%, reporting $33.655 per ounce, continuing to set a new historical high along with the spot gold price.

Traders believe that if the key level of $33 is broken, the silver price may climb to $34.35 in the short term. In addition to the recent significant decline in U.S. recession risks (September non-farm data, CPI exceeding expectations), China's continued economic stimulus is also boosting market sentiment, and the industrial attributes of silver have also stimulated traders' enthusiasm for long positions. At the same time, geopolitical risks may provide further support.

On October 18th, China's National Bureau of Statistics released economic activity data for September and the third quarter. The actual GDP growth rate for the third quarter slowed from 4.7% in the second quarter to 4.6%, higher than the market expectation of 4.5%. In terms of seasonally adjusted quarter-on-quarter growth, the third-quarter GDP growth rose from 0.5% in the second quarter to 0.9%.

Nomura mentioned that China's industrial production and retail sales growth both exceeded expectations, with year-on-year growth of 5.4% and 3.2% in September (market expectations were 4.6% and 2.5%), significantly rebounding from 4.5% and 2.1% in August. The recovery in industrial production was mainly driven by electric vehicles and solar panels, with the output growth of these two products accelerating to 48.5% and 8.2% year-on-year in September, compared to 30.5% and -9.0% in August. On the contrary, affected by the continued decline in the real estate industry, the growth in cement production remains relatively negative, with a year-on-year decrease of -10.3% in September, not much changed from -11.9% in August. Thanks to the home appliance and automobile trade-in programs, the growth in retail sales of home appliances and automobiles accelerated to 20.5% and 0.4% in September, compared to 3.4% and -7.3% in August.

Will silver still be able to surge in the future? Institutions believe that the "gold-silver ratio" has now dropped from around 90 to 80.73. Looking at the historical average, the gold-silver ratio can下探 to around 60, and there is no rule out that silver still has room to catch up further.However, the strengthening of the US dollar may limit the potential for gains. Institutions tend to believe that if Trump takes office, the dollar is more likely to surge in the early stages. Traders may closely monitor further policy developments in China and any changes in global risk sentiment. Recently, expectations for a significant interest rate cut by the Federal Reserve have also been revised, with the market expecting a slightly less than two 25 basis point cuts by the end of the year, while before the release of the non-farm employment data on October 4th, the expected cut was close to 75 basis points.