Gold prices have seen a decline recently, marking a sixth consecutive day of losses. The drop continues as market participants adjust their expectations about significant interest rate cuts and focus on the upcoming Federal Reserve meeting minutes and inflation data. Some strategists suggest that while gold has been popular as a hedge, the current rally appears to be waning, prompting profit-taking.
Despite this pullback, gold remains one of the year's top-performing assets, having surged 27% to over $2,600 per ounce. Earlier, it hit a record high of $2,694 per ounce. Comparatively, the S&P 500 index has risen by 20% this year. Factors such as geopolitical and economic instability have driven the demand for gold as a safe-haven asset. Additionally, a weaker dollar and potential interest rate cuts by the Federal Reserve have supported gold prices.
Analysts are watching the upcoming release of U.S. inflation data closely. Since the latest employment data, there has been much discussion about the economic outlook. The Federal Reserve's September policy meeting minutes and U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) data are also highly anticipated events. Analysts suggest that a significant rise in inflation could impact gold's current trajectory, although geopolitical tensions and market uncertainty may keep gold trading within a range.
Interestingly, Costco (COST, Financial), a popular warehouse membership store, has contributed to the physical gold demand by successfully selling 1-ounce gold bars to its members. This new venture has been a key driver for Costco’s recent financial success, with sales achieving double-digit growth. Analysts estimate that Costco could be selling between $100 million to $200 million in gold bars monthly, with the possibility of even higher sales.
Historically, physical gold demand was driven by central banks and major financial players rather than retail giants like Costco. The expansion of gold buying beyond traditional entities indicates a shift in the market, driven by investors seeking tangible assets over government bonds.
