Gold defies bond sell-off once again
Nominal 10-year Treasury yields have risen to the highest level since 2007. Just when we though the bond sell-off of 2022 was behind us, it came back with a vengeance. Hawkish Federal Open Market Committee (Fed) minutes and a string of positive economic data from the US are casting doubts whether we have reached peak interest rates in the US. The Fed certainly has left the door open for further hikes and its decisions will be very data sensitive.
Relative to the bond market, gold is holding up well at USD1916/oz (on 23 August 2023). While gold prices temporarily fell below the psychologically important US$1900/oz level, Treasury Inflation-Protected Securities (TIPS) prices had fallen much further and other-things-being-equal, the bond market would indicate gold should be trading closer to $1830/oz. Gold’s resilience in the past month mirrors its defiance again the bond headwinds of 2022.
Gold has been facing US Dollar headwinds as well in the past month. The Dollar Basket (DXY) has appreciated 2.1% in the past month (to 22 August 2023). With a more hawkish Fed, there is a greater risk of further dollar appreciation.
Central banks bought a net 55 tonnes of gold in June following three straight months of selling. The Central Bank of Türkiye's (CBRT) return to net buying in June helped reverse a temporary trend. Having been a significant net seller between March and May to meet local demand, it swung back to net buying in June, adding 11 tonnes to its official reserves.
Of all the precious metals, silver fell the most in the past month (-6.1%). Net speculative positioning fell 88% to a level one standard deviation below its 5-year average. However, we suspect that excessive shorts were being covered in the past week. Since hitting an intra-day local low of US$22.35/oz at 13.30 on 15/08/2023 silver prices have bounced up to US$24.14/oz at 15.00 on 23/08/2023 (+8.0%). That low point seems to match the Fibonacci-implied support levels looking at year-to-date silver performance (the 38.2% retracement).
Silver inventory in London Bullion Market Association (LBMA) vaults, which fell precipitously in 2022 (-28%), has stabilised and gained 3% year to July 2023. Silver holding in exchange traded commodities (ETCs) have only modestly declined in 2023 so far (4%) after a 15% decline in 2022.
The last week’s bounce in silver price takes the gold-to-silver ratio back down to 81 (22/08/2023), from 84 (08/08/2023), fractionally higher than 80, where we were a month ago (21/07/2023). Net speculative positioning in silver fell 88%, one standard deviation below its 5-year average according to Commodity Futures Trading Commission (August 15, 2018 to August 15, 2023)
Platinum and palladium also followed silver higher in the past week, but monthly prints have come in lower. Auto sales have largely been improving in the past year, with sales up 18% y-o-y in Europe (June) and US (July). However, China sales fell 1% y-o-y in July. Autos are the main source of demand for platinum group metals.
This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
Relative to the bond market, gold is holding up well at USD1916/oz (on 23 August 2023). While gold prices temporarily fell below the psychologically important US$1900/oz level, Treasury Inflation-Protected Securities (TIPS) prices had fallen much further and other-things-being-equal, the bond market would indicate gold should be trading closer to $1830/oz. Gold’s resilience in the past month mirrors its defiance again the bond headwinds of 2022.
Gold has been facing US Dollar headwinds as well in the past month. The Dollar Basket (DXY) has appreciated 2.1% in the past month (to 22 August 2023). With a more hawkish Fed, there is a greater risk of further dollar appreciation.
Central banks bought a net 55 tonnes of gold in June following three straight months of selling. The Central Bank of Türkiye's (CBRT) return to net buying in June helped reverse a temporary trend. Having been a significant net seller between March and May to meet local demand, it swung back to net buying in June, adding 11 tonnes to its official reserves.
Of all the precious metals, silver fell the most in the past month (-6.1%). Net speculative positioning fell 88% to a level one standard deviation below its 5-year average. However, we suspect that excessive shorts were being covered in the past week. Since hitting an intra-day local low of US$22.35/oz at 13.30 on 15/08/2023 silver prices have bounced up to US$24.14/oz at 15.00 on 23/08/2023 (+8.0%). That low point seems to match the Fibonacci-implied support levels looking at year-to-date silver performance (the 38.2% retracement).
Silver inventory in London Bullion Market Association (LBMA) vaults, which fell precipitously in 2022 (-28%), has stabilised and gained 3% year to July 2023. Silver holding in exchange traded commodities (ETCs) have only modestly declined in 2023 so far (4%) after a 15% decline in 2022.
The last week’s bounce in silver price takes the gold-to-silver ratio back down to 81 (22/08/2023), from 84 (08/08/2023), fractionally higher than 80, where we were a month ago (21/07/2023). Net speculative positioning in silver fell 88%, one standard deviation below its 5-year average according to Commodity Futures Trading Commission (August 15, 2018 to August 15, 2023)
Platinum and palladium also followed silver higher in the past week, but monthly prints have come in lower. Auto sales have largely been improving in the past year, with sales up 18% y-o-y in Europe (June) and US (July). However, China sales fell 1% y-o-y in July. Autos are the main source of demand for platinum group metals.
This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.