Key Macro Charts: Strong Correlated Indicators for Gold Price in the New Phase (2024/9/24)
India's gold imports hit a record high in August, exceeding $10 billion, with a 30% increase in import volume. Analysts point out that the Australian dollar breaking through long-term resistance levels may reflect investors' increased confidence in the natural resources economy. Keep an eye on the 10-year U.S. Treasury yield, as closing above 3.765% could lead to further increases. The price of gold is closely related to central bank purchases, especially those of China, leading to a decoupling of the physical gold market from ETFs
Gold Buying Demand
In August, India's gold imports hit a record high, surpassing $10 billion. The World Gold Council estimates that the country imported 140 tons of gold, three times the total in July. From 2024 to date, India's gold imports have increased by 30%.
Focus on the Australian Dollar
Analyst: Despite widespread market skepticism, it can be seen from the chart below that the Australian dollar has broken through long-term resistance levels.
Given its close connection to the commodity market, this may indicate that investors' confidence in capital allocation to resource-driven economies is strengthening. I believe that these profound macro changes may usher in an era vastly different from the past decade, especially for markets that will benefit from rising commodity prices.
U.S. Treasury Yields
Analyst: Investors need to focus on the 10-year U.S. Treasury yield, currently testing near the 3.765% resistance level, if it closes above 3.765%, it may continue to rise to 3.85%.
Despite remarks from Goolsbee, Bostic, and Kashkari hinting at a possible 50 basis point cut, yields remained stable that day. This is not just about rate cuts: PMI data shows that due to rising production costs, prices of goods and services are increasing. So ironically, while the Fed cuts rates, mortgage rates in the U.S. may still rise.
Highly Correlated Indicators for Gold Prices
Before the Russia-Ukraine conflict, there was a very close relationship between gold and ETF holdings (green area in the chart below). However, since then, the correlation between the two has completely disappeared, replaced by a strong correlation between gold prices and another set of data, as shown in the red area in the chart.
Gold buying demand comes not only from hedge funds, but the biggest driver is central banks, especially China's purchases, which have led to the decoupling of the physical gold market from ETFs. While the buying activities of many central banks are kept confidential, hedge funds serve as an indicator of central bank purchasing dynamics due to their access to "non-public" central bank information. Therefore, the spot gold price is now directly correlated with the indicator in the chart below.
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