In an interesting phenomenon in the global financial markets from the Fed's rate cut in September to the upcoming US election next week, there is actually something very interesting:

Both US treasuries and gold, which belong to the safe-haven asset camp: one has repeatedly experienced a similar rate hike trend in the rate cut cycle, continuously facing selling pressure; while the other continues to write a bull market miracle, breaking new highs effortlessly...

From the historical correlation between gold and interest rates, this scene is actually extremely unusual.

Regarding the deep-seated reasons behind the decline in US treasuries and the recent selling pressure, we have already had in-depth discussions in the early hours with the latest report from Benjamin Picton, senior macro strategist at Rabobank. Here, let's focus on gold again, because the abnormal divergence in the trends of the two assets makes it hard to believe there is no connection...

Just how strong has gold risen this year? Perhaps nothing is more convincing than the chart below. It can be seen that the performance of gold this year in terms of price increase has no "rival" in the past 45 years - this is the best performance of gold in the first 10 months of a year since 1979.

As spot gold prices climbed further to the $2790 mark on Wednesday, it is now approaching the $2800 integer mark:

Gold is usually closely related to interest rates. As an asset that does not provide any income, when interest rates are high, its attractiveness to investors usually decreases, while when interest rates decline, it is generally more popular.

Compared with the two phases of the past six years (January 2018-January 2020, September 2022-October 2024), the inverse correlation between gold and 2-year U.S. Treasury yield actually still holds true.

However, it is worth noting that, according to Goldman Sachs analyst Lina Thomas' research, the inverse correlation between gold and 10-year real interest rates has actually clearly broken down.

Note: The red line represents the 10-year U.S. Treasury real yield, and the brown color represents the gold price.

Why did this happen? Goldman Sachs' answer is that since the Russia-Ukraine conflict, the central banks' demand for gold in the London OTC trading market has grown fivefold, which has greatly reset the relationship between gold prices and real interest rates.

The root of the divergence in correlation between the two seems to be interestingly traced back to when Russian central bank assets were frozen by the West. Goldman Sachs stated that since the freezing of Russian central bank assets by the U.S. and Europe in 2022, the quantity of gold purchased by emerging market central banks has significantly increased.

Note: Trends of gold prices and 10-year U.S. Treasury real yield, with the start date of the Russia-Ukraine conflict marked by the dashed line in the middle.

Goldman Sachs also emphasized three key sources of demand in the current gold market:

Global financial and monetary authorities (central banks have concerns about the safety of reserve assets);

Investors (facing interest rate uncertainty);

Speculators (seeking a safe haven).

Goldman Sachs report believes that, from a structural perspective, the increasing demand from more central banks (another 9% by the end of 2025) and the gradual increase in gold ETF holdings after the Fed rate cut (+7%) will be enough to offset the drag from Goldman Sachs' assumption of the gradual normalization of gold positions (-6%).

Goldman Sachs's new model estimates that for every 100 tons increase in gold demand, the gold price will rise by 1.5%-2%.

This also indicates that even by the end of 2025, as the global central bank's gold purchase speed slows to 30 tons per month - about one-third of the average 85 tons of gold purchase speed observed since 2022, the gold price will rise by another 9% by the end of 2025.

In addition, in the current precious metals market, the rise in safe-haven demand bred by the U.S. election must also be mentioned. History shows that when uncertainty arises and investors seek safe havens, gold positions tend to rise. For example, during the six tariff policy announcements in the United States in 2019, asset management companies' net long gold positions increased by nearly 900 tons from May to October of the same year, as shown in the pink area in the figure...

Goldman Sachs stated that as the U.S. presidential election approaches, Western investors are also returning to the gold market. Gold may offer the benefit of hedging potential geopolitical shocks, including potential escalation of trade tensions, Fed subordination risks, and debt concerns. With falling interest rates, the holdings of Western market gold ETFs will also gradually increase, consistent with their historical relationship.

Goldman Sachs currently forecasts that the gold price will reach $2900 per ounce by early 2025, higher than the earlier estimate of $2700 per ounce, and by December 2025 it will reach $3000 per ounce.

Coincidentally, Barry Dawes, Chairman of Martin Place Securities, also pointed out recently that the current gold bull market seems to be forming a parabolic trajectory. He said, "Let's see how high this vertical surge will go ... The breakthrough of golden industrial concept stocks indicates that the peak of the current price may still be just a short-term high."

He predicts that the gold price is moving towards surpassing $3000.