After wild swings, gold showed a strong rebound lately. Gold bullion ETF SPDR Gold Shares GLD added more than 8.2% past month (as of Nov 1, 2023). The latest Middle East conflict between Israel and Palestine boosted the safe-haven demand, thus facilitating the gold prices. Moreover, a less-hawkish Fed, going forward, should keep the surge in U.S. treasuries at check.
Gold prices tend to move inversely to interest rates. When interest rates decline, non-interest-bearing gold becomes more attractive as it competes more favorably with interest-bearing investments like bonds. Additionally, the demand for inflation hedge and growing fears regrading global growth worries are driving investors toward gold, as it is considered a safe haven.
As such, gold ETF rallied over the last month with iShares Gold Trust IAU, abrdn Physical Gold Shares ETF SGOL, SPDR Gold MiniShares Trust GLDM and Goldman Sachs Physical Gold ETF AAAU each gaining about 8%. Leveraged gold ETF ProShares Ultra Gold UGL is up 15.8% past month. USCF Gold Strategy Plus Income Fund ETF GLDX too has advanced 8.1%.
What Lies for Rest of 2023?
Gold is testing the key $2,000 level. For the fourth quarter of 2023, the gold is likely to stay subdued as real yield rises. The U.S. benchmark real yields started the year at 1.53% and ended the month of October at 2.46%.
However, there is a rise in jewelry demand which helps gold produce positive average returns of 0.71% and 1.3%, respectively, in November and December. Plus, a generally weaker dollar in December promotes gold in recording its average second-best month of the year, per an article on capex.com.
India – the world’s second-largest consumer of the yellow metal — will play a key role in determining gold prices during November-December due to the occurrence of the Dhanteras festival (the most auspicious day in India for buying items precious metals) and wedding season in the next two months.
Gold demand in India, the world’s second-largest consumer of the yellow metal, increased 10% during the third quarter of 2023, helped by a slight softening of gold prices and festive demand, according to the World Gold Council (WGC). Meanwhile, gold demand in China, the world’s largest gold-consuming nation, rose marginally in Q3 this year.
What Lies for 2024?
With the expectations of the Fed being less-hawkish—to—dovish and real yields falling somewhat, there are chances of an upside in gold prices in 2024. The average consensus forecast is $2,100 per ounce for 2024, according to the latest gold rate forecast from the largest investment banks in the world, per the Capex.com article.
Central Banks Buying
Central banks in emerging markets are seeking to lower reliance on the U.S. dollar for reserves holdings (especially in light of the United States using the dollar as a tool in its sanctions against Russia) and is also intending to hedge against inflation. In the first nine months of the year, China has taken the lead in driving unprecedented central bank acquisitions of gold worldwide, followed by Poland and Turkey, per Financial Times. The buying has been on top of last year’s all-time high.
Bottom Line
The gold’s rally from here depends on the Fed’s behavior and the progression of geopolitical crisis. If the Fed stays put from here, it would be a good new for gold investing. Gold investors should closely watch the economic and market events before taking any decision.
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SPDR Gold Shares (GLD): ETF Research Reports
iShares Gold Trust (IAU): ETF Research Reports
abrdn Physical Gold Shares ETF (SGOL): ETF Research Reports
ProShares Ultra Gold (UGL): ETF Research Reports
USCF Gold Strategy Plus Income Fund (GLDX): ETF Research Reports
SPDR Gold MiniShares Trust (GLDM): ETF Research Reports
Goldman Sachs Physical Gold ETF (AAAU): ETF Research Reports
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