November 2023 Market Roundup

Category: Invest

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Precious Metal Prices

As of November 2023, the gold market experienced a significant increase in price, opening at $1,982.50 following a low of $1,821.90 in October. Silver also saw an increase, opening at $22.670 after a mid-October low of $21.055. Although US Treasury yields dramatically declined, gold faced challenges due to the growing market sentiment that global bond yields had peaked, leading to a peak in rates. However, it was unsuccessful in its attempt to break resistance at $2,009/oz, and it was in a holding pattern ahead of the US jobs data. Silver generally underperformed gold, reflecting its industrial demand and the current economic risks. In general, both metals were expected to consolidate, with gold dependent on geopolitics and silver continuing to underperform. The market dynamics continue to be influenced by factors such as US Treasury yields, the US jobs report, and the sentiment surrounding central bank policy and economic conditions.

Central Banks’ Gold Buying Surges, Led by China

Central banks worldwide have significantly increased their gold reserves, with China taking the lead, as they seek to diversify away from dollar reserves, hedge against inflation and reduce dependence on the US dollar. The World Gold Council reports that central banks have acquired 800 tonnes of gold in the first nine months of the year, a 14% increase year on year, and this robust purchasing trend is expected to continue [3]. China’s central bank, the People’s Bank of China, has been particularly active, acquiring 181 tonnes of gold in 2023, taking its total holdings to 4% of its reserves [4]. This surge in gold buying is attributed to various factors, including the desire to safeguard against inflation, geopolitical tensions and de-dollarisation efforts following the US’s use of sanctions involving the dollar. The ongoing appetite for gold extends beyond central banks, as individuals and investors also turn to gold as a store of value amidst economic uncertainty and rising inflation.

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India’s Demand Expected to Grow

India’s jewellery market is expected to grow by USD $21.54 billion between 2022 and 2027, driven by the cultural significance of gold jewellery, especially during weddings and festivals like Diwali [5]. India is the world’s second-largest importer of gold, with gold considered a symbol of prosperity. In Q3 2023, India’s gold demand surged by 10% to 210.2 tonnes, in contrast to a 6% global decline, with investment in gold bars and coins reaching the highest level since 2015 [6]. The preference for bars and coins over jewellery was attributed to a price correction. However, near-record-high gold prices could dampen demand during the peak festival season, potentially resulting in the lowest purchase volumes in three years. Consumers have accepted a higher price point, but substantial price drops closer to Diwali could change the situation. Despite this, India’s full-year gold demand for 2023 is predicted to be around 700 metric tonnes, slightly lower than the previous year’s 774.1 metric tonnes. The elevated gold prices have led to a surge in scrap supplies from individuals selling old jewellery and coins [6].

Gold’s Resilience Amidst Unchanged Interest Rates and Market Volatility

The Federal Reserve and the Bank of England have decided to keep their respective interest rates steady at 5.5% and 5.25%. This move is in line with market expectations and comes amidst global economic challenges. Gold is often seen as a safe haven for investors during times of inflation and economic uncertainty, as it provides stability. Furthermore, its low correlation with traditional assets makes it a valuable option for portfolio diversification. Several central banks around the world are increasing their gold reserves, putting emphasis on its value.

Recent comments by the Federal Reserve, indicating a possible increase in interest rates, have caused a decline in both stock and precious metal prices. The US dollar index has surged more than 6% since July, putting pressure on global assets. On the other hand, oil prices have increased by over 25%, indicating that a bullish trend may be on the horizon [7]. Despite market trends driven by interest rate decisions, investors continue to face volatility and uncertainty. In times of economic uncertainty, gold and crude oil prices have historically displayed a positive correlation, influenced by factors such as geopolitical tensions, economic turbulence and inflation.

Asteroids: Future Primary Source of Precious Metals?

The commercial space sector is expected to drive space mining operations in the next few decades, with asteroids said to potentially become the primary source of precious metals. Increasing costs, environmental concerns and growing demand for clean energy technologies have led to a rise in interest in asteroid mining for precious metals that are used in batteries, solar panels and other critical applications. Shifting from terrestrial mining to space mining could facilitate continued metal usage whilst reducing environmental and social costs. With declining space access costs and growing commercial interest, space mining is emerging as a sustainable growth opportunity that is said to offer technological advancements and economic potential for the future [8].

King Charles III’s Sixpence Unveiled

The Royal Mint has released a special silver sixpence that features the portrait of His Majesty King Charles III, commemorating a unique addition to the traditional festive celebrations. The sixpence, dating back to the sixteenth century and once a part of British currency until decimalisation in 1971, holds historical significance as it is customarily stirred into Christmas puddings for good luck. Designed by John Bergdahl, the 2023 coin showcases The King’s official royal cypher at its centre, encircled by apple and orange blossoms symbolising good fortune. This design will exclusively appear on the 2023 Sixpence, commemorating King Charles III’s coronation year. Families traditionally incorporate the sixpence into their Christmas puddings on Stir-up Sunday, which is celebrated on 26 November in 2023. The finder of the sixpence is believed to receive blessings of wealth and luck for the coming year. The silver sixpence is available for purchase on The Royal Mint’s website [9].

References:

The contents of this article, accurate at the time of publishing, are for general information purposes only, and do not constitute investment, pensions, legal, tax or any other advice. Before making any investment or financial decision, you may wish to seek advice from your financial, pensions, legal, tax and/or accounting advisors.

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