Gold Market Commentary and Outlook

Central bank buying and elevated geopolitical risk helped gold prices rise 15% to reach new all-time highs in 2023. Looking forward, the lacklustre consensus outlook for gold in 2024 may be challenged by new geopolitical tensions and overexuberance regarding monetary policy.

Gold prices started the month on the backfoot, having fallen below US$1,850/oz at the end of September. The events in Israel on 7 October set a rally in motion that took the US dollar price back up above US$2,000/oz by 27 October. The record-high monthly finish was mirrored in almost all other major currencies

Gold lost 3.7% in September, with the bulk of the move occurring during the last three days of the month. We attribute gold’s challenging month to an extensive run up in bond yields alongside a stronger dollar. The sell off at the end of the month was also likely the result of a strong adverse reaction to US economic data, a fall in the Chinese local premium and a negative technical breach.

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.