Gold Market Commentary

Geopolitical crisis takes centre stage in February

The LBMA Gold Price PM (US$) was marginally down in January, dipping less than 1% to US$1,795/oz. But this provides an incomplete picture of the interesting dynamics seen throughout the month.

Gold may face similar dynamics in 2022 than those from last year as competing forces support and curtail its performance. 

Gold rose 2% in November based on the LBMA reference price, rallying early in the month before giving up most of those gains in the following weeks.

Gold fell in September by 4% to around US$1,743/oz. This was the second consecutive month of declines, with gold now over 8% lower y-t-d. Gold wasn’t alone. Treasuries, Corporates, US- and non-US equities all fell in September possibly as a result of deleveraging. The Q2 level of margin debt for equities was at a record high. It would be understandable if some leverage has been removed as we head into the historically volatile month of October. And it’s quite possible that this de-leveraging has affected most assets (energy and industrial metals excepted).

Gold fell slightly during August, down 0.6% in US dollars, on modestly firmer interest rates following strong US jobs data.

Equity yields support gold as investors position for historical September strength

Interest rates will likely remain key drivers of financial assets. Gold is no exception. Yet, the negative impact of higher rates will likely be offset by the longer lasting effects and unintended consequences of expansionary monetary and fiscal policies created to support the global economy.