Gold Market Commentary and Outlook

Gold declined marginally by 1% in August, in the face of higher yields and a stronger dollar. Sentiment remained weak for most of the month as ETFs continued to lose AUM while COMEX managed money net long futures positions fell to a five month low.

August has been a good month for gold returns over the past two decades, likely driven by seasonally weak bond yields and consumer sentiment, anticipation of seasonal equity volatility in September, and some gold restocking in India and China.

Gold fell 0.9% in May as an unwinding of net long futures offset global gold ETF inflows. But the small drop was largely currency-driven as outside North America, gold saw gains. A debt-ceiling deal was reached in the 11th hour in the US which, coupled with good economic data, might remove some short-term support for gold. However, the saga has implications that may help gold over the next few months, and an economic slowdown has likely not been averted.

Gold in US$/oz returned just 0.1% in April, consolidating after a strong run up during Q1. Support for gold came from lower rates and positive ETF flows while lower inflation expectations and profit taking created a drag.

Cracks from unprecedented rate hikes are beginning to show, with US small banks and real estate sectors at the epicentre. Gold’s case just got stronger.

Gold shed 5.2% in February, as surprisingly strong US economic data propelled both yields and the US dollar higher. Global gold ETFs suffered more losses led by European funds while North American funds saw small outflows for the first time in two months. Recent futures positioning remains unavailable following issues with the data.

A falling US dollar was a significant contributor to gold’s 6.1% return in January and another positive ‘unexplained’ factor could be continued central bank buying or expectations thereof. Gold futures have also helped support the rally and, looking forward, we expect North American gold ETFs to continue seeing positive demand in coming weeks as historical analysis shows that positioning in futures tends to lead ETFs flows by two weeks.

Gold posted a small gain in 2022; no mean feat given an unprecedented rise in rates and a strong US dollar. 2022 was a textbook example of gold’s stable and uncorrelated performance amid market turbulence.

Gold fell 2% in October on rising bond yields and dollar strength, but it was positively impacted by higher breakeven inflation. But a weaker US dollar vs. euro and lower ETF outflows provided some support

Gold fell for the sixth consecutive month, dropping 2.6% to finish September at US$1,671.8/oz. It was a challenging month for most assets, with global equities down 9.5%, global bonds down 5.1% and commodities down 8.4%.