Perth Mint Gold Sales at 10-Month High

Why are so many people suddenly buying physical gold? Perth Mint's silver sales also reached a 7-month high. Let's look at a few key developments and why gold has been moving sideways this week.

Gold temporarily fell in price by 0.9% Monday but has recovered most of its losses after a week of ranging. The short selloff was likely partially caused by investors waiting for key U.S. economic data to be released. The dollar also reached its strongest level in a month, which made gold temporarily less expensive.

One topic currently stealing the spotlight is the possibility of Israel striking Iran's oil facilities. This could halt an estimated 1.5 million barrels per day of oil being produced and cause the price of oil to spike. Speculators often flock to place risky leveraged trades on the back of oil shortages, and this has the potential to be a major one. What this means for gold is that it may be serving as a distraction this week from gold trading. At the same time, any serious attack could reignite gold buying as a safe haven.

Investors will get a host of key pointers on the economy over the next few weeks that could offer some signs about future economic trends. Incoming ISM services data and initial jobless claims are approaching, and the U.S. non-farm payroll report is due tonight. These may have a bearing on expectations of future rate cuts by the Fed also.

Recent data on Wednesday showed U.S. private payrolls rose more than expected in September. This is another data point going against the Fed’s recent aggressive cut, but it does support the theory that they have successfully pulled off a soft landing. Although crashes often happen after rate-cutting cycles begin, this is not always the case, and definitely not what most people want to see happen. The probability of a 50-basis-point rate cut at the Fed's November meeting dipped to 36% from 49% last week, according to the CME FedWatch Tool. Unless the upcoming data is exceedingly poor, one might expect Jerome Powell to follow through with a series of smaller, consistent cuts.

The Perth Mint announced this week that its gold product sales in September were the highest in 10 months, while those of silver jumped to a seven-month high. This is potentially from the large escalations in the Middle East mentioned above, which are compounded with a clear path of increasing global liquidity, which we discuss in our latest macro and global liquidity analysis. What is interesting is that buyers have been specifically accumulating physical gold and silver, rather than digital contracts representing the price of the two metals.