Last week, markets were driven by geopolitical tensions and policy surprises. The expiry of the US-Iran ceasefire and threats of economic and military retaliation heightened geopolitical uncertainty, while the US Treasury's surprise announcement of bond buyback increases added to volatility.
Global average gold producer All-In Sustaining Costs (AISC) rose by 5% q/q and 16% y/y to US$1,785/oz in Q1’26. Rising costs have become a persistent feature of the industry, with the quarter marking the 28th consecutive year-on-year increase in AISC.
In response to a relentless rise in longer-term bond yields, the US Treasury announced that they were increasing their ‘buybacks’ of longer-term Treasuries to stem the rise. Yields dropped, as did the dollar and gold rallied 3%. This is not yield-curve control (YCC) but it might be a step in that direction, as Mohamed El-Erian remarked following the announcement. Here’s our take on what it means.
India's gold market showed signs of strengthening, supported by recovering jewellery demand, steady investment demand, increased futures trading activity, and a rebound in imports. These developments point to improving conditions ahead of the festive season.
Last week, global economic updates delivered a blend of signals, while US-Iran talks showed little progress. In the US, subdued inflation, weak retail sales and softer consumer sentiment reduced expectations of near-term rate hikes. In the Eurozone, Q2 growth surprised to the upside and inflation remained contained. Meanwhile, deflation concerns resurfaced in China, while inflation stayed elevated in both Japan and India.
China’s wholesale gold demand rebounded in June, closing a relatively subdued H1 weighed down by weakness in the jewellery sector. Despite June’s loss, Chinese gold ETFs recorded robust inflows in H1. Retail investment demand for bars and coins also remained strong during the first half. Meanwhile, the PBoC extended its gold-buying streak to 20 months in June, reporting the largest gold purchase since October 2023 and lifting its holdings to 2,346t, representing 8% of total reserves.
Geopolitical concerns eased as talks on access through the Strait of Hormuz continued. Economic updates were uneven across major economies: in the US, resilient business activity and strong corporate earnings contrasted with a cooling labour market; Eurozone manufacturing improved; China’s exports stayed strong even as domestic activity moderated; Japan’s consumer spending weakened further; and in India, the RBI kept rates unchanged while business activity moderated.
Central banks bought 51t of gold in June with Poland and China continuing to lead gold accumulation. Buyers for the month included Uzbekistan, Kazakhstan, Jordan, Czech Republic, Ghana and Georgia, while net sellers this month were Russia and Turkey.
Last week was marked by shifting monetary policy expectations, fragile geopolitical conditions in the Middle East, and volatility across equity and currency markets. The Fed, BoE, and BoJ all held rates amid dissenting votes.
