Why are gold prices falling?

Hello everyone and welcome to Russell Investments market weekend review for the week of October 24th 20125. My name is Be Chan. I'm a senior investment strategist and head of Canadian strategy. Today we'll be discussing three major topics. First, gold prices. Why did they fall this week? Next, we'll talk about the Canadian and British inflation data. And finally, we'll wrap up with a discussion of the economic growth environment both in China as well as in the United States. So, let's get started. First, gold prices have been on top of mind for many investors this week. We saw gold prices fall quite significantly during the Tuesday trading session as well as the Monday trading session this week. And you might be wondering what's causing that drop in gold. I think one of the factors was that even though gold has had such a strong run in 2025, when you look at some traditional valuation models, it suggests that perhaps gold prices may have gotten a little bit too stretched. And so into that environment of somewhat stretched valuations, it can potentially create a little bit more fragility in that asset class. As we think about the path ahead for gold prices into 2026, I think because gold is a commodity, it will likely remain somewhat volatile into 2026. Gold prices can be influenced by factors such as geopolitics, perceptions of economic growth, and a series of other key economic factors as well. So ultimately, from our perspective at Russell Investments, having an exposure to gold in a small amount can be a useful diversifying addition to the portfolio. But it's also important to think about how you size that position in order to be able to manage portfolio risk effectively, especially when you see weeks of significant volatility in gold prices. Next, I want to talk about the latest inflation data. So, this week we got inflation data from both Canada and the United Kingdom. Let's start with Canadian inflation data, which unfortunately came in a little bit hotter than expected. Headline inflation was 2.4% year-over-year. core inflation also edged up a little bit compared to the previous inflation report. Nevertheless, when you look at Canada's economic backdrop, when you're seeing the fragility in the labor markets, I do continue to expect that the Bank of Canada will likely cut interest rates at their next meeting, which is taking place next week. Meanwhile, in the United Kingdom, we're seeing a little bit of a different print on inflation, where inflation actually surprised slightly below consensus expectations, which is an encouraging development. Nevertheless, inflation rates in the United Kingdom still remain elevated and still remain above the Bank of England's target. But I do expect that as we continue into the final stretches of this year and into next year, the Bank of England will also continue its journey of cutting interest rates and bring interest rates down to a more normalized level. Finally, let's talk about the economic growth backdrop in both the US and China. We'll start with the US where the government shutdown is still in effect as of filming this on Wednesday, October 22nd. But even with the government shutdown, it's important to recognize that there are still a lot of private sector data that we can turn to to be able to understand the trajectory of the economy. So, for example, later this week, we're going to be getting PMI data, which will give us a latest reading of the growth backdrop in the United States. And even before we get the PMI data on Friday of this week, when we look at the Atlanta Fed GDP model, now caster for the third quarter, what we see is that this quantitative growth measure is expecting that GDP growth in the third quarter could reach 4%. Which would be pretty much in the same ballpark as we saw in Q3 and would be basically double the longer term trend. Now, when we look at the industry consensus of economists, as of this week that we're filming, the industry consensus is probably closer to between two and 3%. But even that would still be a relatively robust and resilient pace of economic growth. And I think it's because of this resiliency that we're seeing in the US economy where growth still remains strong, where consumers are still spending. We see private sector measures of retail sales tracking 6% year-over-year, which is above a longer term average. into this backdrop. I don't see the need for the Federal Reserve to cut rates aggressively by 50 basis points. Instead, I'm only expecting a 25 basis point cut by the Federal Reserve at their meeting next week. In terms of the Chinese economic environment, we had third quarter GDP data from the National Bureau of Statistics in China that showed GDP growth in the third quarter did step down compared to the first half of the year. Nevertheless, GDP growth was 4.8% 8% which came in slightly above consensus expectations. As we think about the path ahead for the Chinese economy, we think the Chinese economy continues to face headwinds. But nevertheless, the Chinese government has reiterated a desire to meet that growth target of around 5% for GDP. And so I continue to expect that they're going to try to do more, for example, with more incremental stimulus in order to be able to meet that growth target. Bottom line is when we look at the economy, the financial markets on balance, the global economic backdrop does look resilient even though there are pockets and regions where things might look a little bit more under pressure. But above all, we think investors will continue to benefit from staying disciplined, stay invested, and focused on the long-term outlook. Thanks for tuning in and hope people enjoy the upcoming World Series finals. Hi, I'm Sophie Antaly, head of portfolio and business consulting at Russell Investments. If you liked what you just saw and heard, consider subscribing to our YouTube channel or check us out on LinkedIn. Thanks for tuning in.