Gold once again shows its mettle

[View this email in your browser]( [Youtube]( [Kitco Metals]( Editor's Picks [@neils_C]( The resilience of the U.S. economy never ceases to surprise, as economists betting on weakness in the labor market were resoundingly disappointed on Friday. According to the [Bureau of Labor Statistics, 254,000 jobs were created last month, marking the strongest employment report in six months.]( The unemployment rate dropped to 4.1%. While inflationary pressures persist, consumers saw their wages grow by 0.4% last month. For the year, wages are up 4%. With headline inflation at 2.2%, real wages have increased by 2.8% so far this year. Markets, which had been betting on a slowing economy, have had to adjust quickly. According to the CME FedWatch Tool, the market was previously pricing in a 30% chance of a 50-basis-point rate cut in November. However, in an instant, those expectations dropped to less than 1%. Heading into the weekend, markets now see nearly a 1% chance of no rate cut. This shift in monetary policy expectations has pushed the U.S. dollar index to a seven-week high, rising above 102 points. I realize this is a lengthy introduction, but I want to emphasize the headwinds that gold faces. Under normal market conditions, these factors could easily push gold prices down by more than 1% in a single day. However, it feels like we are far from normal times. December gold futures last traded at $2,665.70 an ounce, down 0.5% on the day. Meanwhile, prices remain roughly unchanged from last Friday. [Ole Hansen, Head of Commodity Strategy at Saxo Bank, provided the most succinct explanation for gold’s resilience:]( “Gold is holding up for one reason, and one reason alone: the risk of a weekend event in the Middle East.” Once again, no one wants to head into the weekend without holding some form of insurance, and right now, gold remains the best safe-haven asset to own. Concerns are mounting that Israel’s escalating war in the Middle East could draw in Iran and, potentially, the rest of the world. [Earlier this week, Iran launched 180 ballistic missiles at Israel after Israel intensified its attacks on Hezbollah in Lebanon.]( The world is collectively holding its breath, waiting to see what Israel will do next. While a general backdrop of global uncertainty has been a significant factor behind gold’s unprecedented rally this year, we haven’t seen much reaction to specific periods of heightened tension. According to a growing number of analysts, gold prices could easily push toward $3,000 an ounce before the end of the year as geopolitical tensions continue to rise. But even this milestone could be just the beginning. While geopolitical turmoil may trigger sporadic bullish volatility, gold’s role as a safe-haven asset makes it invaluable. In a world of rising global debt and uncertainty, gold remains the only asset that carries no third-party risks and no geopolitical risks. Analysts have been quick to point out that these are the two biggest reasons why central banks have been accumulating gold. While gold may face challenges from shifting monetary policies and resilient economic data, it remains a reliable constant in an unpredictable world. [Gold]( track record as a long-term store of value makes it irreplaceable in any diversified portfolio. That’s it for this week. Neils C. 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