Au & AI

• Gold, which advanced a further +3.4% in US dollar terms
• The US dollar, which strengthened +0.9% against sterling

• US equities, which pulled back -2.4%, although the decline moderated to a -1.4% fall in sterling terms
• Brent crude oil, which fell a further -2.8% in US dollar terms

Gold surged to an all-time high above $4,000 per troy ounce last week, marking an annual return of more than 50% in dollar terms, as investors fret about inflation, geopolitics and the fiscal challenges facing many economies. Although it doesn’t provide income and is therefore tricky to value, gold is perceived to be a dependable store of value that may hedge against excessive inflation and government largesse. Central banks have also been buying gold. The People's Bank of China, for example, bought another 40,000 ounces in September, taking the current value of its holding to an estimated $283bn. Other industrial metals also continue to climb. Silver and platinum are at 14- and 13-year highs, respectively. 

Many equity indices also made all-time highs last week. More than 6-months after its last low on 8 April – the nadir after President Trump’s Liberation Day tariff announcement – the S&P 500 has advanced over 35%, ranking it as the fourth best period of returns since 1950 following a drop of at least -15%. Tech names continue to drive the rally, with the sector now comprising 35% of the S&P 500 – another all-time high. Demand for artificial intelligence continues. TSMC, a global leader in chipmaking, beat forecasts and reported a 30% rise in its Q3 earnings last week.

Simultaneous highs from gold and equities may not be unheard of, but it is uncommon. Gold highs reflect concerns over monetary debasement – that government borrowing and money-printing may devalue a currency. Buoyant equity markets indicate investor optimism about future growth and earnings, particularly the potential for AI to be revolutionary.

French President, Emmanuel Macron, reappointed Sébastien Lecornu as Prime Minister on Friday evening after a week of political turmoil. Lecornu, who resigned the previous Monday after just 27 days in the role and his last cabinet had lasted just 14 hours, was again tasked by the President with holding discussions across different parties in the hung parliament.   

Lecornu named a new cabinet on Sunday, with an increase in technocratic figures, but with most major ministerial positions remaining unchanged. Finance minister, Roland Lescure, was amongst those to remain in post, with the latest government needing to present a budget for next year in the coming days. The difficulty in passing a budget while tackling France’s huge public spending deficit has been behind the political deadlock and increasing concern in financial markets. The most left- and right-wing parties in the French parliament – who collectively control more than a third of French National Assembly – have already made clear they will file a motion of no confidence in the new government. The CAC 40 stock index in Paris was volatile last week but rebounded somewhat on the news of Lecornu’s reappointment. After spiking early last week, France’s 10-year borrowing cost dropped back to end the week at c.3.48%, despite the continued uncertainty. 

Japanese stocks rallied last week following the surprise victory of Sanae Takaichi in the ruling Liberal Democratic Party’s (LDP) leadership election. Should she become Prime Minister, investors expect the country’s first female premier to push for a looser path for monetary and fiscal policy. Both major Japanese stock indices initially gained more than 3% following Takaichi’s win, while the yen weakened sharply on the news. Japanese government bond (JGB) yields initially moved higher too. Strong demand for a midweek JGB auction calmed the markets briefly. However, the Komeito party – the LDPs key long-term coalition partner – then departed the ruling coalition, severely dampening sentiment in both equity and bond markets. Opposition parties sought to launch talks with a view to supporting an alternative, unified candidate and block Takaichi from becoming prime minister. 

• Car finance mis-selling: The Financial Conduct Authority (FCA) suggested that lenders could pay out £8.2bn in compensation, with the average payout amounting to £700 per agreement – less than previously estimated
• Fed minutes: The minutes from September’s Federal Open Markets Committee meeting showed that officials were strongly inclined to lower interest rates. However, committee members were divided over how many more cuts were coming – a slim majority expect two further cuts in 2025
• Orsted jobs: Danish windfarm developer announced plans to cut some 2,000 jobs – around a quarter of its workforce. The developer, which is 50% owned by the Danish state, has recently seen its share price reach an all-time low as the US administration rows back on renewables
• US – Argentina: The US announced plans for a $20bn financial support package for Argentina, purchasing Argentine pesos in an effort to calm an escalating currency crisis. Financial turmoil has risen in Argentina ahead of midterm elections, as it appears support for President Javier Milei (a Trump ally) and his cost-cutting, free-market reform agenda is waning
• FCA’s cryptocurrency ban lifted: The FCA lifted its four-year ban on the selling, marketing or distributing of cryptocurrency exchange-traded notes (ETNs) to retail investors last week. This brings the UK into line with other markets, although debate still rages as to the merits of including cryptocurrency within multi-asset investment portfolios
• Renewables: Renewable energy became the world’s leading source of electricity in the first half of 2025 – surpassing coal for the first time according to Ember, a global energy think tank
• Chinese EVs: Chinese electric vehicle maker BYD reported an 880% increase in UK sales, making the UK the company’s biggest EV market outside China 

Disclaimer

Past performance is not a reliable indicator of future returns. Nothing herein should be construed as a recommendation to hold, buy or sell any security or encourage any investment decision. The mention of any particular asset class, sub-asset class or company does not imply that it is held, or may ever be held, in any product or service.