Talking Gold — January 2023
Gold Market Recap & Outlook
Gold ended 2023 with the spot price rising 13.10% on the year — the first calendar year gain since 2020 — and closed at US$2063/oz.1 Gold increased 1.31% in December while also experiencing an 11.60% gain in Q4 2023.2 Gold’s spot price this month reached a new all-time high of US$2135/oz on December 3, 2023, with the LBMA Gold PM Price also reaching a new all-time high of US$2078/oz on December 28, 2023.3
Despite several traditional macroeconomic headwinds, gold remained resilient throughout 2023 as it continued to defy many investors’ expectations — both upside and downside. Compared to other major global asset classes, gold fared quite well in 2023 — particularly against global bonds and broad commodities, despite elevated yields and commodity prices (see Chart of the Month). Market volatility, geopolitical turmoil, and uncertainty across monetary and fiscal policy all helped push gold higher throughout the year. Fundamental demand, from record central bank purchases to robust jewelry demand, also helped gold weather a challenging macroeconomic backdrop.
Looking ahead to 2024, improving sentiment towards gold could result in increased global demand and potential new highs. Overall, the outlook for gold may be buoyed by the turning of three macroeconomic tides: 1) dovish monetary policy, as US consumer-led economic growth slows and inflation stabilizes; 2) softening US dollar (USD), as the global economy closes the gap to US growth and central bank gold buying continues; 3) rising investor sentiment for gold amid heightened risks.
The possibility of greater equity volatility in 2024 remains elevated, with potential market drawdowns stemming from stretched equity valuations and stocks “priced for perfection,” geopolitical tensions, and commodity volatility. Gold may provide significant portfolio protection as a risk management tool in a heightened risk environment. Additionally, continued robust fundamental demand, led by central bank purchases, may provide continued support for gold throughout 2024.
Gold’s Chart of the Month
Gold Performance Drivers
Flows
Global gold-backed ETFs registered outflows in December for the seventh consecutive month, but at a continued slower rate. Global gold ETF holdings in December experienced estimated outflows of US$667M compared to an average of US$2.6B over the previous six months, according to Bloomberg data.4 COMEX managed money net speculative gold positions remained bullish at 72,929 contracts (as of December 26), led by a reduction in both long and short gold futures positioning.5
Factors
The US Consumer Price Index (CPI) fell to 3.1% year-over-year as of November 2023, down from 3.2% the month prior.6 US 10-year Treasury yields closed December at 3.88%, down from 4.33% at the end of November.7
Fundamentals
US Mint retail sales of gold eagle bullion coins increased 12% in 2023 compared to the year prior. Total gold troy ounces (ozt) sold in 2023 amounted to 1.092M ozt of gold compared to 0.976M ozt in 2022.8