Gold hits fresh record

The week started slowly in the US and Canada as markets were closed for the Labour Day holiday.

In Asia, Chinese equities retreated after Monday’s rally backed by hopes of improved China–India ties. A nearly 20% jump in Alibaba shares, after the company reported a triple-digit surge in AI revenues, lifted the Hang Seng Index by 2% on Monday before some profit-taking this morning. Alibaba briefly reached its highest level since April before pulling back. The Chinese AI rally still appears to have room to run.

In energy, US crude opened the week on a firmer footing as a softer dollar and fading hopes for Ukraine peace talks outweighed concerns over India’s reluctance to buy US crude. Those factors helped oil bulls retest the $65pb resistance, with scope to extend toward $66–67.70pb range that aligns with the 50- and 200-DMAs.

In metals, gold hit a fresh all-time high above $3’500 per ounce in Asia, surpassing its April peak. The rally reflects a softer dollar but also strong central-bank and institutional demand as investors rotate out of US Treasuries. The share of US Treasuries held by foreign central banks has been declining for over a decade, but that shift into gold accelerated this year amid US debt concerns, ratings downgrades, trade tensions and geopolitical risks. Central banks’ gold allocations even surpassed their US Treasury holdings this year. Meanwhile, Indian pension funds are seeking approval to invest in gold ETFs, hinting at strong demand despite record price. Silver also surged to its highest level since 2011. Both metals have further room to run. Yet, with the gold–silver ratio still above its long-term range of 60–80, silver may have greater upside potential.

In Europe, equities posted modest gains on Monday after PMI data suggested a faster expansion in euro area manufacturing. Germany’s figure slipped just below 50, but Italy and France moved back into expansion territory after prolonged contractions. The release helped the euro rise to 1.1736 against a broadly weaker dollar, though sellers quickly re-emerged as the widening French–German 10-year yield spread revived concerns over French political risk. Separately, Paris accused Rome of fiscal dampening, adding another layer to French tensions. That said, France’s budget strains are not viewed as contagious so far, which should limit broader euro-area fallout. The CAC 40 remains vulnerable — both to fiscal worries and weakening demand in the luxury sector — while the broader Stoxx 600 has been supported by strength in defense, utilities, and banks. Any French-related selloff could be interesting buying opportunity.

On the data front, attention now shifts to the euro-area CPI flash estimate for August. Headline inflation is expected at 2.0%, with core easing to 2.2% — both near the European Central Bank’s (ECB) target. A print in line with expectations should reinforce the view that the ECB will hold rates steady in September. The next move is still likely a cut; softer growth could justify one more 25bp reduction by year-end. Yet markets now assign less than a 40% chance of another cut in 2025, down from ~50% in July.

This relative hawkishness versus the Federal Reserve (Fed) has supported the euro’s rebound since late August. However, if eurozone growth disappoints, ECB doves could regain the upper hand. CFTC data show net speculative euro longs have risen sharply this year, largely on hopes of stronger military/security spending and diversification away from US assets. Central banks have also increased their euro holdings: official buyers accounted for 20% of eurozone bond issuance so far in 2025 (vs. 16% in 2024), while an OMFIF survey pointed at a net 16% of central banks plan to increase euro reserves over the next 12–24 months (vs. 7% last year).

In the short term, the euro’s appreciation already reflects much of this, meaning crowded long positioning could leave it vulnerable to a pullback. A flare-up in French politics would be a natural trigger. But in the medium run, the euro’s outlook remains constructive thanks to diversification away from US assets.