ForexLive Asia-Pacific FX News Wrap: Gold hit a record high, silver and copper surged also

The United Arab Emirates (UAE) has overtaken London to secure its position as the world’s second-largest gold trading hub, driven by surging demand from Asia, according to a report by the Dubai Multi Commodities Centre (DMCC). The report highlights that Asian markets have reshaped the global gold industry this year, pushing prices to unprecedented highs before a slight pullback. Dubai and the UAE are strategically positioned as a vital link between Eastern and Western markets. The DMCC predicts an “Asian Century” for gold, envisioning an economic corridor among BRICS nations—Brazil, Russia, India, China, and South Africa—where the UAE plays a pivotal role. Ahmed Bin Sulayem, Executive Chairman and CEO of the DMCC, explained: "In recent years, we’ve observed a major transformation in the gold market. Western sanctions have fueled record gold purchases by central banks, leading many nations to reconsider their reliance on the US dollar. This has given rise to a new gold corridor across Asia, with Dubai at its core." The UAE’s gold trade has witnessed remarkable growth in 2024, with $129 billion worth of gold flowing through Dubai—a 36% increase compared to the previous year. This surge has positioned the UAE as the second-largest global gold trading hub, surpassing London. The DMCC’s report attributes this shift to geopolitical tensions and sanctions, particularly against Russia, which have disrupted traditional financial systems. Many countries are now diversifying their reserves by increasing gold purchases and repatriating bullion stored in the US. In some cases, gold is even being used as a substitute for the US dollar in international trade. As central banks continue to bolster their gold reserves, prices have surged, creating ripples across the global economy. The DMCC report underscores the need for key reforms to ensure sustainable growth in the gold market. Recommendations for the Future of Gold Trading To maintain this momentum, the DMCC suggests several initiatives: Enhancing Transparency and Regulation: Improving oversight in gold trading can ensure market stability and trust. Promoting Digital Innovation: Fintech companies are encouraged to develop digital tools, making gold trading accessible to small-scale and younger investors in emerging markets. Digitizing the Gold Market: The industry should work towards global standards for digital gold products and blockchain systems. These measures could increase transparency, reduce pricing inconsistencies, and minimize reliance on derivatives. As Dubai cements its role in the evolving gold market, the UAE’s rise underscores the shifting dynamics of global trade, with Asia at the forefront of this transformation.

Gold prices took a notable hit this week, sliding nearly three percent after the U.S. presidential election concluded with Donald Trump as the projected winner. Investors quickly moved capital into assets like the U.S. Dollar, stocks, and Bitcoin, reducing gold's appeal as a safe haven. As of Wednesday, the XAU/USD rate dropped to the $2,660s range, largely due to the strengthening dollar following Trump’s victory. With Trump securing 277 electoral votes to Vice President Kamala Harris’s 224, market sentiment suggests his economic policies could boost the U.S. dollar. Strength in the dollar typically pressures gold prices since gold is priced in dollars and tends to become more expensive for holders of other currencies. In addition to the dollar’s rise, capital is shifting from traditional safe-haven assets like gold toward riskier investments, including Bitcoin and equities. Trump’s assertions that he can negotiate peace in regions like the Middle East and Ukraine, though optimistic, may also contribute to the decreased demand for safe-haven assets.

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Long-Term Outlook for Gold

Gold prices saw a significant rise, reaching around $2,720 in the early hours of Monday's Asian trading session.  This surge in demand for gold, a well-known safe-haven asset, is driven by heightened global uncertainties, including concerns about the US election and escalating geopolitical tensions.  Ongoing conflicts in the Middle East and potential economic challenges in China have also contributed to the rise in gold prices. Investors are turning to gold as a reliable option amidst these crises.  Alexander Zumpfe, a metals trader at Heraeus Metals Germany, commented, “With the war between Israel and Hezbollah intensifying, investors are seeking refuge in gold. Additionally, uncertainty over the US presidential election and possible monetary easing from the Federal Reserve are pushing gold prices higher.”  Expectations of further interest rate cuts by the US Federal Reserve are also supporting the precious metal’s value. The Fed recently lowered interest rates for the first time in over four years, and there is growing anticipation for additional cuts. According to the CME FedWatch Tool, there is a 90% chance of another rate reduction in November. Lower rates often increase the appeal of non-yielding assets like gold.  However, economic concerns in China could limit gold’s upward momentum. China, the world's largest consumer of gold, experienced slower-than-expected growth in its economy during the third quarter of the year. The National Bureau of Statistics reported a GDP growth of 4.6% for Q3, slightly below their target of 5%. This slowdown could impact global demand for gold.  Despite these challenges, gold continues to attract attention as a safe investment option in these uncertain times.