Talking Gold — September 2023
Gold in August: A Recap
The gold spot price dipped 1.27% in August, ending the month at US$1940/oz, and bringing gold’s year-to-date return to 6.37%.1 Comparatively, global equities and global bonds fell 2.79% and 0.13%, respectively, this month.2 Gold continues to outperform global bonds year to date, though lags global equities. On a trailing one-year basis, gold’s return (+13.39%) is comparable to global equities (+13.95%) while leading global bonds (+0.55%) over this same period.3
In August, the gold price ranged from a low of US$1889/oz to a high of US$1944/oz as the US Dollar Index rose 1.73% and investor focus remained on US monetary policy.4 This month featured the annual Jackson Hole Economic Symposium where Federal Reserve (Fed) Chair Powell stated the Fed is prepared to keep interest rates higher for longer to bring inflation down to its 2% target. In response, gold dipped below US$1900/oz before rebounding by month-end as investor concerns shifted to the economic impact of sustained higher rates, as inflation has trended lower throughout this year.
While the spot price for gold dipped in August, Fitch Ratings' downgrade of US long-term debt from AAA to AA+ this month,5 along with China’s ongoing growth slowdown, added uncertainty for financial markets and the global economic outlook. This may drive support for gold heading into Q4.
Gold Performance Drivers
Flows
Global gold ETF holdings fell by 1.6% in August for the third consecutive month, according to Bloomberg data.6 Net speculative positioning in COMEX gold futures fell to the lowest level since November 2022 amid rising short positions among money managers this month. Net positioning dropped to +9109 contracts on August 22, 2023, before closing the month at 39,242 contracts as long positions rose.7
Factors
Headline US Consumer Price Index (CPI) rose slightly in July to 3.2% year-over-year from 3.0% the month prior, while remaining considerably lower from 6.5% at the start of 2023. Core US CPI fell slightly in July from 4.8% year-over-year to 4.7%.8
Fundamentals
Global central banks purchased 55 metric tons (t) of gold in July driven by China and Poland, as each purchased approximately 23t, according to the World Gold Council.9