The recent record highs in gold prices are expected to influence its performance in October by sustaining upward momentum, driven by the factors that have already seen the precious metal hit all-time highs (ATHs) 19 times this year.
There has been a rapid escalation of the situation in the Middle East, and the prospect of descending into a full-blown regional war looms large.
This alone could push gold prices higher. However, coupled with the economic shock of a potential war is the fact these events are playing out in the arena of some of the largest oil and gas producers in the world; a disruption to production and transportation is likely, and a spike in oil prices and inflation can only follow.
Several parallels from past performances can offer insights into what to expect as we move towards Q4 of 2024.
Historically, gold tends to hit record highs during economic uncertainty, inflation, and geopolitical tension. Recent highs, which have seen gold prices exceeding $2,600 per ounce, mirror previous surges during global crises like the 2008 financial meltdown and the COVID-19 pandemic in 2020. In both cases, gold sharply rose as investors sought safe-haven assets. The ongoing economic concerns in 2024 – such as central bank rate cuts, inflation risks, and geopolitical instability – will likely keep gold prices elevated.
Gold’s rally during the 2008 crisis was driven by fears of a deep recession and banking collapse. Today’s situation has some similarities with added concerns such as slowing global growth, a potential recession in key economies, the escalation of the Russia-Ukraine war and the deteriorating situation in the Middle East. This could all lead to a repeat of gold’s safe-haven demand.
It is the threat of war, combined with a weakening dollar (down almost 5% this year), that leads me to conclude we will witness further growth and further ATHs in gold throughout October with a possible upside of breaking through the $2700 barrier and bouncing off $2500 as its new support level.
The most major market dynamic for UK savers and investors in October will be the first budget of the new Labour government. That the UK will face an ever-increasing tax burden is Westminster’s worst-kept secret. In this environment, the tax efficiency of gold creates further demand, and this extra demand can only propel pricing.
Gold has historically performed well when there is financial uncertainty and when government policy changes. Its role as a tangible, internationally recognized store of value makes it appeal when future taxation and fiscal policies are uncertain. Keir Starmer is also due to make his decision on whether to allow Ukraine to launch long-range ballistic missiles into the heartland of Russia. If taken, this decision can only be classified as an additional escalation and further increases the importance of holding safe-haven assets.
