Monthly Gold Update - June 2023

Gold: Spotlight on June’s performance
Gold ended the first half of 2023 at $1,919, falling 2.2% in June but for the first six months of the year adding 5.2%. The general negative downtrend in gold over the month was broken by the short-lived uprising of the Wagner group in Russia as the relatively longer-term issue of higher rates remained a headwind to gold.
Source: Bloomberg, to 30 June 2023. Past performance does not predict future returns.
On intra-day measures, gold traded below $1,900 on 29 June before sharply rebounding and ending the month at $1,919; gold dropped back to levels of February this year. During the month, gold fell below its 100-day moving average as gold ETFs recorded outflows. The US found a resolution to the debt ceiling, which is not only a negative for gold in itself (restored political stability), but the associated increase in debt issuance should keep yields firm.
It is expected that central bank purchases will have provided support to the gold price as they have been seen to buy on price falls in the recent past with specifically emerging markets diversifying reserves away from USD. This precluded the technical weakness expected following the triple-top mentioned in last month’s report.
Gold lost 2.5% in this second quarter, meaning for H1 2023 the metal has appreciated 5.2%.
Keep an eye on … central bank purchases.
Source: Bloomberg, to 30 June 2023. Past performance does not predict future returns.
Real yields ended June higher at 1.62% from 1.48% at the start of the month, with a significant bounce into month-end as the third read on Q1 US GDP figures saw a significant uplift with revisions both to consumer expenditure and exports. The same report showed a slight fall in personal consumption expenditure prices giving a further boost to real growth.
Although the debt ceiling issue was resolved, it came at the expense of the restoration of student loan repayments. Repayments were paused at the start of the pandemic but as part of the agreement to raise the debt ceiling, student loan repayments will restart in October. This will be a detractor from US consumer spending as it could constitute as much as 9% of borrowers gross pay. There are mixed signals coming from the US economy and this with higher rates could cause additional weakness.
Keep an eye on … sentiment around the restoration of US student loan repayments in October.
Source: Bloomberg, to 30 June 2023. Past performance does not predict future returns.
The USD fell 1.4% through June, using the DXY index, as the gold price also fell. Month-on-month, although the Fed paused on rate hikes, the market repriced its expectation for the year-end Fed Funds Rate to 5.4% from 4.9%. The first rate cut was also pushed back to March of 2024 as Fed officials hit a more hawkish tone.
Despite the change in the expected path of US rates, the USD ended the month lower as peer central banks to the Fed were also priced to be more aggressive than previously expected. The relative positions with respect to the fight against inflation has already seen long-dollar positions unwind as investors look past the one or two further hikes Chair Powell referenced.
Keep an eye on …. inflation progression outside of the US, particularly in the Eurozone.
Investment risks
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The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Important information
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Data as at 30 June 2023 unless otherwise stated.
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