June 2023 Market Roundup

Precious metal prices 

Gold markets saw some fluctuations in the first week of June, with prices opening at $1,958.75 on 1 June and rising to a high of $1,981 on the 2nd, before retreating to $1,942.50 by the 5th. However, towards the middle of the month, prices found some stability and were poised for a second week of gains as the dollar weakened. This shift in the market comes amidst growing expectations that the Federal Reserve may pause its rate hike cycle in the coming weeks. The optimism surrounding a potential Fed pause was fuelled by solid US payrolls data, with the economy adding 339,000 jobs in May - surpassing estimates by a wide margin. The strong labour market and the possibility of the Fed continuing to hike interest rates in the summer could impact gold prices, as Treasury yields charge higher.  

Other precious metals also saw movement, with silver rising more than three percent from an opening price of $23.49 to a high of $24.21 by 12 June. In contrast, palladium prices fell six percent to $1,315.00 by the 12th, due to expectations of oversupply in the market next year. Nornickel, which is responsible for 40% of global palladium production, predicts a surplus of 300,000 ounces in 2024 compared to a deficit of 200,000 ounces in 2023.  

2023 Central Bank Gold Reserves Survey 

The 2023 World Gold Council Central Bank Gold Reserves Survey reported that central banks continue to view gold favourably as a reserve asset, with 24% of central banks planning to increase their gold reserves in the next 12 months. Central banks are said to be becoming more pessimistic about the future role of the US dollar and more optimistic about the future role of gold. The report showed that a majority of central banks expect a slight increase in the proportion of total reserves denominated in gold over the next five years, with developing economies driving this view. Historical position and concerns such as inflation, geopolitical risks and financial market concerns continue to influence decisions to hold gold.  

Russian Gold Shipments to the UAE, China and Turkey 

According to Reuters, the United Arab Emirates (UAE) has become a significant trade hub for Russian gold as western sanctions limited Russia's traditional export. More than 100 non-Russian companies reportedly handled Russian gold between February 2022 and March 2023, with some shipments reaching London before import bans were imposed. The London Bullion Market Association (LBMA) has stated that it will investigate allegations of LBMA members handling Russian gold and may revoke their membership if proven true.  

Gold Shines for American Investors 

A recent Gallup survey showed that more American investors now consider gold a better long-term investment than stocks, a trend not seen since 2013. The survey revealed that 26% of Americans view gold as the top investment – up from 15% in 2022 – compared to 18% who favoured stocks (the lowest level since 2011). Real estate remains the most popular long-term investment but fell from 45% to 34%, with gold in second place closing the gap considerably. Despite the findings, Ryan Detrick, Chief Equity Strategist at the Carson Group, remains optimistic about stocks, citing factors such as the potential end of the Federal Reserve's rate hike campaign and positive economic outlook reflected in a New York Fed business survey. Historical data suggests that being bullish when the crowd is bearish can be profitable. 

Gold Demand Expected to Decline 

According to consultancy firm Metals Focus, gold demand is expected to decline by nine percent to 4,375 metric tons in 2023, largely due to a reduced appetite from central banks compared to the record-high purchases seen in 2022. Despite this, central bank purchases are predicted to remain historically strong at around 600 metric tons this year. On the supply side, gold supply is projected to increase by two percent to 4,881 metric tons, driven by higher mine production, recycling and the return of hedging by miners. Metals Focus forecasts that the average gold price for 2023 will reach a new all-time high of $1,890 per troy ounce, up five percent from last year. However, the firm warns that gold prices could face pressure in the second half of the year due to expectations of prolonged high interest rates by the US Federal Reserve, despite strong demand from the official sector, retail and institutional investors.  

The Royal Mint Launches Commemorative 50p Coin to Celebrate the NHS 

The Royal Mint has launched a commemorative 50p coin to mark the 75th anniversary of the National Health Service (NHS). In a show of support, The Royal Mint has pledged to donate 100% of the net proceeds from the coin sales to NHS Charities Together, with an expected donation of around £225,000. The design of the coin, by Senior Designer Alice Lediard, incorporates words including Dedication, Support, Empathy and Knowledge, to reflect the nation's appreciation for the NHS and its remarkable staff.