Central banks collaborating with gold investors

Last week’s Fed Beige Book indicates a slowdown in the US economy. Of the report generated by the 12 regional districts, only three indicated modest growth, while the others pointed to weaker economic conditions.

The report highlighted inflationary pressures due to tariffs, as rising prices are being passed on to consumers. It also noted how shutdowns are affecting businesses and eroding community confidence amidst ongoing uncertainty. In addition, key economic data has been withheld due to the shutdown.

In his recent remarks, Fed Chairman Powell noted that the hiring process has slowed and the tightening of immigration controls is leading to structural pressures that are affecting job openings. Powell’s comments on the economy were viewed as dovish, raising the likelihood of a rate adjustment in the upcoming meetings.

Two significant developments have been influencing financial markets. Ongoing trade tensions between the US and China continue to create market uncertainty. Additionally, the US stock market is under pressure, with banking stocks declining on Thursday before recovering, as US banks reportedly borrowed nearly USD 15 billion from the Federal Reserve’s Standing Repo Facility (SRF).

The restructuring of loans is once again putting significant pressure on banks, prompting them to utilise their borrowing options. This borrowing represents the highest amount in two days since the onset of Covid.

Despite these challenges, reports indicated that global inflows into the US market exceeded USD 2 trillion last week. Inflow into the equity sector has remained consistent over the past four weeks. Nevertheless, the overall value of the US Dollar weakened during the week, with the USD Index (DXY) declining by 0.44%. Although DXY rebounded on Friday and could stabilize today (Monday), much will depend on the developments in US-China relations.

Currently, tensions between the two nations are heightened due to China’s restrictions on rare earth mineral exports. While the US has threatened a 100% tariff on imports, President Trump has suggested that such high tariffs are not sustainable, indicating that there is room for negotiation and improvement.

Furthermore, a temporary reciprocal 90-day pause on increased tariff rates is set to end on November 10.

Next week, the release of US economic data will also be impacted by the ongoing government shutdown, which hampers access to information from the statistical department.

Legislators are scheduled to meet on Thursday to address funding issues. The shutdown, which began on October 1, 2025, is a result of Congress’s failure to pass legislation for the 2026 fiscal year, leading to pay suspensions for nearly 2 million workers. In light of current economic conditions and a shortage of work, approximately 750,000 workers are facing suspensions or layoffs.

Gold

Gold continued its upward trend throughout the week but saw a correction on Friday after reaching an all-time high of USD 4,379, subsequently dropping by USD 193 and closing at USD 4,250. This marks a record 10-week gain for gold, an unprecedented achievement. Current leading factors include the US government shutdown and tensions with China over rare earth minerals. The overall sentiment towards gold remains positive.

Since it was priced at USD 2,000, there have been calls for corrections, yet these corrections have been short-lived over the past five years, as buyers have consistently emerged during any dips. Various reasons, such as the Russia/Ukraine conflict, issues in Gaza, US tariff increases, and geopolitical tensions, have continually supported the gold buyers. In my view, the Trump administration’s attention to Venezuela, especially with news of potential US military action, is also a significant factor behind this week’s rise in gold prices, which, despite a near 2 percent drop on Friday, still concluded the week with a 5 percent rise.

However, I believe that the real driving force behind these prices is the constant central bank buying, which is unlikely to stop since organisations like the IMF, World Bank or others cannot compel countries like Russia, China, or Iran to cease their gold purchases. Take note, the moment Central Banks announce they will stop purchasing gold, that’s when gold prices will plummet.

When central banks engage in the currency market, they provide stability. This time, they are collaborating with gold investors, making it difficult to halt the upward momentum.

On the economic data front, there will be limited releases as the statistics department will not issue regular figures. However, US Existing Home Sales data will be available, along with the US CPI and S&P Flash PMI released on Friday.

WEEKLY OUTLOOK — OCT 20-24

GOLD @ USD 4250— While we may experience some corrections, I am not dismissing the possibility of a sudden rise in gold prices, as buying interest could reappear at any moment. The downside support stands at USD 4150, and only a break below this level could lead to a drop to USD 4070. On the other hand, a breakout above USD 4348 would confirm a continuation of the upward trend toward new highs. With patience, buying on dips remains the favoured strategy. The market is set for another volatile week ahead.

EURO 1.1652— The Euro must maintain a level of 1.1520 to continue its upward trend. A break above 1.1790 would bolster expectations for a rise to 1.1840. Conversely, on the downside, keep an eye on 1.1450.

GBP 1.3426— Pound Sterling is anticipated to hold between 1.3320-40 as it continues its ascent towards the 1.3540-60 range before eventually declining. Alternatively, it could reach 1.3598.

JPY 150.64p— The $/YEN pair faces the possibility of losses as it may have difficulty surpassing the 151.50-80 range. For the USD to decline toward 148.50, it must first fall below 149.10. However, a breakout above the resistance zone could push it to test 152.50 zones.

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