Source: Zhitong Finance "Since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%)." With the rebound of the stock market, the old adage "Sell in May and Go Away" seems to have been a bad advice once again. Last month, the S&P 500 index rose 4.8%, the best May performance since 2009. The NASDAQ 100 index rose nearly 6.2%, and the NASDAQ Composite Index rose 6.9%. Goldman Sachs FICC & Equities Trading Division said: "History doesn't really support this saying. Don't sell, leave the market (go on vacation), and enjoy the good times." The rising trend is still to be continued? If history is any guide, it may indicate that the rise of the stock market is not over yet. Looking ahead to the rest of 2024, Scott Rubner, Managing Director of the Goldman Sachs Global Markets Division and tactical expert, pointed out the following historical background for investors. Rubner stated that the S&P 500 index has risen 10.7% year-to-date, and since 1950, the S&P 500 index has risen more than 10% 21 times as of the end of May. In about 90% of these cases, the S&P 500 index rose for the rest of the year. There were only two instances of declines for the rest of the year, in 1987 (-13%) and 1986 (-0.1%). "Since 1950, the median return of the last 7 months of each year (June 1 to December 31) is 5.4%. In the aforementioned 21 cases, the average performance of the last 7 months increased to 8.1%." Rubner added. Rubner also pointed out that the NASDAQ index has risen for 16 consecutive Julys, with an average return of about 4.64%.

Boosted by the expected rate cut by the Fed, gold broke through the $2,500 an ounce mark for the first time on Friday. As disappointing data on the US real estate market was released on Friday, people's expectation of a rapid and further interest rate cut by the Fed was strengthened. Spot gold climbed over 2% on Friday, surpassing the record set last month. Low interest rates are generally favorable for gold, and the two are usually negatively correlated.

Data shows that as builders respond to weak demand, US housing starts in July dropped to their lowest level since the end of the pandemic. Bob Haberkorn, senior market strategist at RJO Futures, said this was another sign that an economic recession was imminent. The Fed will cut interest rates, "more than previously expected".

Gold prices are expected to continue to rise.

Due to the increasingly optimistic sentiment in the market regarding loose monetary policies and major central banks buying gold, gold prices have risen by more than 20% this year. Secondly, as geopolitical risks continue to rise, including the tensions in the Middle East and the Russia-Ukraine war, gold is also seen as a safe-haven asset.

Earlier this year, the rise in gold prices surprised experienced analysts and senior professionals, as there is not always a clear macro catalyst to justify the rise in gold prices. Despite traders reducing their bets on the timing of interest rate cuts, gold prices have maintained these gains. Recently, as the market generally expects the Fed to begin cutting interest rates soon, gold prices have risen slightly.

The recent rise in gold prices is not necessarily surprising. In June this year, consulting firm Metals Focus predicted that gold prices would reach a new record this year, and earlier this month, Citigroup stated that its basic expectation for gold prices in 2025 is $2,700-3,000 per ounce. Secondly, Bank of America previously released a report stating that as the Fed begins to cut interest rates and rising debt brings economic uncertainty, gold prices may reach $3,000 per ounce in the next 12 to 18 months.

Meanwhile, in July, UBS stated that gold has greater upside potential and expects the price of gold to reach $2,600 per ounce by the end of this year and $2,700 per ounce by mid-2025. For investors, allocating gold to their investment portfolios is an attractive diversification and hedging tool.

Market expectations of a Fed rate cut boost gold prices.

A series of economic activity data recently released in the United States makes the market believe that the Fed will cut borrowing costs from the highest level in over 20 years. Traditional driving factors of metals are regaining dominance. Given the mixed signals on the US economic situation recently, there is a dispute over the magnitude of the expected rate cut for September. Nevertheless, the market has already priced in a nearly 100 basis point interest rate cut by the Fed this year.

According to data from the US Commodity Futures Trading Commission, in the week ending August 13th, speculators' net long bets on New York Mercantile Exchange gold futures hit a near four-year high. At the same time, data shows that after years of capital outflows, the amount of gold held by exchange-traded funds (ETFs) has risen in recent months.

Bart Melek, director of global commodity strategy at TD Securities, said that gold investors "tend to believe that the Fed will take more aggressive action in terms of easing monetary policy". Over the next few quarters, he believes gold prices may rise further to $2,700, as "macro/monetary policy and central bank pressures continue to escalate".

Central banks around the world are starting a "gold rush".

Gold may continue to rise in the future, benefiting from strong buying by Western investors and central banks around the world. Adrian Ash, director of research at BullionVault, said:" In the past five years, global central bank demand for gold has surged, with almost one ounce of gold bought by central banks for every ten ounces produced by the mining sector. Central bank endless demand for gold has become one of the cornerstones of the gold bull market, playing a crucial role in both the fundamentals and market sentiment."

According to Ash's data, since the summer of 2004, the total weight of gold in central bank reserves has increased by nearly 19%, while its value in dollars has increased sevenfold to $2.4 trillion, thanks to buying from Russia, China, India, and Turkey.

In addition, African countries are rushing to establish gold reserves to hedge against the impact of geopolitical tensions on their currencies. Countries such as South Sudan, Zimbabwe, and Nigeria are either planning or taking action. A survey by the World Gold Council shows that about 20 central banks are expected to increase their gold reserves in the next year.

Sprott Asset Management's market strategist, Paul Wong, pointed out that the continuous purchase of gold has "approached or exhausted the freely tradable inventory in the market."

According to data from the World Gold Council, as of May 2024, the total official gold reserves worldwide was 36,089 metric tons, while market estimates indicate that the total amount of gold mined in history is about 212,582 metric tons.

Torsten Slok, Chief Economist at Apollo Global Management, says that the reason for the rise in gold prices is that central banks are buying gold, possibly out of concerns about the US fiscal situation, and reducing their dependence on US Treasuries.

Brien Lundin, editor of Gold Newsletter, pointed out that after the US and its allies imposed sanctions on Russia, central bank demand for gold surged. Lundin said, "After the dollar was weaponized, central banks are trying to protect themselves by shifting their reserve assets from dollars to gold."

He said that with the entry of Western buyers, central banks or Chinese investors and depositors have no reason to give up their gold purchases. Therefore, we may see a situation where Eastern and Western buyers simultaneously purchase gold, which would be the first time in history that gold appears as an investable asset. Lundin said that if the market does indeed see a situation where Eastern and Western buyers purchase gold together, this could lead to a situation where the gold price is "higher than what we see today."

Editor / jayden