We share our latest observations on global asset markets regarding T8 Gold

Gold bullion rallied another 2.6% in November (following its 7.3% upward move in October). While the rally in gold started due to heightened geopolitical risks (the conflict between Israel and Hamas), it was sustained through November driven by investors positioning for possible interest rate cuts in 2024. This saw yields on 10-year US Treasury bonds fall by 60 basis points (a two standard deviations downward move) and the US Dollar Index weaken by 3.0%. These macroeconomic tailwinds, saw the gold price rise to finish November at US$2,036 per ounce, just below its 2023 peak of US$2,050 per ounce.

Silver (which has the characteristics of both an industrial metal and a precious metal), outperformed gold in the November rally, strengthening by 10.6% (its second-best monthly return of 2023). Despite the recent outperformance, silver continues to lag gold on a year-to-date basis (silver has underperformed gold by 6.0%). Within industrial metals, the price of copper increased by 4.5% on the greater possibility of rate cuts next year (notwithstanding the backdrop of slowing global economic growth).

In futures markets, investors continued to increase gold exposure during the month, with net long positioning moving up to its 99th percentile compared to the last 12 months. In silver, net long positioning hit its 95th percentile.

The largest gold ETF (SPDR Gold Shares, or GLD) received its first monthly inflow (US$ 1 billion) after five consecutive months of outflows. This acted as a tailwind for the gold price through November. A sustained positive shift in sentiment among ETF investors would be a tailwind for the gold price as capital is re-allocated to the asset class, after reductions in eight out of the last twelve months. Gold ETFs are the key swing factor in the gold market, accounting for anything from 20% of demand to 20% of supply.