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<Research>JPM: Every USD10B Increase in Demand Pushes Gold Up 3% QoQ; Minor Reallocation from US Treasuries Could Drive Gold Above USD5K
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The total value of global commodity futures open contracts fell for the first time since August by 1.7% (USD28.49 billion) WoW to USD1.6 trillion as of last Friday (October 3), according to a JPMorgan research report on commodity market fund flows. This decline was attributable to an outflow of USD13.6 billion in contract funds caused by an 8% WoW slump in crude oil and refined petroleum product prices. JPMorgan also highlighted a continuous rise in recent gold prices, which surged by another 3.4% to nearly USD3,900 per ounce on October 3, approaching historical highs. Historically, gold has generally recorded positive returns during the Fed's rate-cutting cycles, and its performance has been particularly strong in recent years. In contrast, returns for other precious metals have been more mixed. Adjustments, which typically occur 2-3 months after the first rate cut, often present good opportunities to add gold holdings. In strategists' estimates, every USD10 billion increase in quarterly nominal gold demand can drive prices up by around 3% QoQ. Accordingly, even a minor reallocation from the USD29 trillion US Treasury market to gold is sufficient to push gold prices above USD5,000 per ounce. AAStocks Financial News |
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