We share our latest observations on gold markets

All movements are expressed in United States (US) dollar terms, unless otherwise stated.

Key points

• The gold bullion price consolidated during November following a spike to all-time highs in October. While gold’s medium-long term fundamentals remain strong, we’re mindful of elevated volatility in the short-term and believe further consolidation is needed before the price can move sustainably higher.
• The price of gold bullion and the index of gold miners appreciated on the prior month. Please refer to the monthly report for detail specific to the performance of the fund.
• In our view, diversified investors who are not directly invested in gold bullion and gold miners, are underweight the biggest trade in global markets presently. The present period of consolidation is an entry point.
• Can the gold price go higher? We encourage investors to consider the gold price forecasts from the investment banks that actually trade gold bullion (and are therefore qualified to opine on it). These banks (e.g. Goldman Sachs and JP Morgan) are upgrading their forecasts to levels much higher than the current spot price on a 12-month view.
• The fundamentals of the gold mining sector are compelling and still trading at a material discount to fair value. Some commentators have compared the present time to the mid-2000s. We would remind investors that from the end of 2005, the gold bullion price went on to strengthen by 267% over nearly six years before it reached a peak in 2011.
• The potential for the global trade war to cause an inflation shock should be motivating investors to identify investments which would stand to benefit from such a scenario. We recall that the second inflation shock in the 1970s resulted in the gold price spiking by 179% over 12 months.

Market update

The gold bullion price consolidated during November following a spike to all-time highs in October and what we believe was excessive (and irrational) short term exuberance. While gold’s medium-long term fundamentals remain strong (elevated demand and tight supply), we’re mindful of elevated volatility in the short-term and believe further consolidation is needed before the price can move sustainably higher.

The fundamentals of gold miners (margins, cash generation, balance sheet health, leverage to higher gold prices) are exceptional and a majority continue to trade on valuations well below fair value and historic norms. This, combined with US equities indices near to all-time highs is likely to motivate equity investors to seek safe haven asset classes such as gold (and equity sectors, such as gold miners, which are leveraged to this asset class).

Macroeconomic data

While the US Government shutdown ended on 12 November (making it the longest in history), it disrupted and most certainly distorted the Core Personal Consumption Expenditures Price Index and the Non-farm Payrolls Report, which are the Federal Open Market Committee (FOMC)’s preferred measures of inflation and unemployment, respectively. The disruption to this data creates a significant obstruction to gaining a clear picture of the state of the US economy and therefore the outlook for monetary policy.

Interest rate expectations

Shifting interest rate expectations was a key driver of equity market volatility during the month. Expectations for an interest rate cut at the FOMC’s December meeting oscillated wildly during the month from almost fully priced-in at the end of October to a less than 30% chance intra-month, following the comments from the chair of the US Federal Reserve at the October meeting that “A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it.”. By the end of the month, the market was placing a 99% chance of a cut in December and a second in June 2026. We reflect that while the base case is for an interest rate cut in December, such sharp swings in expectations over a short period of time highlight the risk that the market could be blindsided which would be a short-term downside catalyst for major indices.

Consumer confidence

Consumer confidence (you will recall that consumer spending accounts for nearly 70% of US economic activity) weakened to 88.7 from 94.6 in the prior month (with the context that readings of less than 100 indicate a more pessimistic than normal outlook).

The response of US consumers to the tariff shocks will be an important factor which contributes to determining the trajectory of the US economy. In the short term, while the impacts are not yet fully known, we believe enough time has passed to reduce the risk of a sudden crash in consumer confidence. Acknowledging consumer confidence is believed to be driven by a combination of job security, wages, inflation and interest rates, we reflect that all of these factors remain extremely dynamic in the present environment and critical to monitor.

Market impacts

Bonds

US Treasury yields declined at the short end of the curve which reflected expectations for a US interest rate cut at the December FOMC meeting and drove gains in most bond benchmarks (Global Aggregate Bond Index +0.2%). The yield curve steepened slightly but remains neutral with the 10-year/2-year spread at 52 basis points.

We remain mindful of risk at the long end of the curve on the basis that a yield of 4.5-5% on 20-year US Treasuries may not be sufficient compensation for the risk of lending to a government with a debt level of 150% of gross domestic product and an outlook for material budget deficits for the foreseeable future.

Currencies

The US dollar weakened modestly (US Dollar Index -0.3% to 99). Looking ahead we anticipate headwinds for the US dollar driven by falling US interest rates and slowing US economic growth. We believe that questions in relation to the US currency’s role as a global safe haven (driven by investor concerns about US economic policies such as tariffs, budget deficits as well as political interference with the US Federal Reserve and government agencies such as the Bureau of Labor Statistics) may add to the headwinds facing the US dollar by encouraging capital to diversify into other markets.

Commodities

The strong market for hard commodities continued, led by precious metals although gold (+5.9%) lagged ‘precious-industrial metals’ such as silver (+16.0%) and platinum (+6.1%). Copper (+3.3%) continues to benefit from supply disruptions at major mines, pushing the price close to all-time highs in nominal terms while the headwinds for crude oil (-2.9%) continued with the commodity experiencing a combination of weak demand and rising supply from OPEC.

Equities

Equity markets wobbled during November with US technology stocks (Nasdaq 100 Index -1.6%) and major indices in Asia under most pressure. The most notable areas of weakness in Asia were South Korea (KOSPI Index -4.4%) and Japan (NIKKEI 225 Index -4.1%). Weakness in the first half of the month gave way to a rally which saw global equities end the month more or less unchanged (MSCI World Index +0.2%).

Gold bullion markets

Central banks

Based on data reported so far, central banks made 53 tonnes of net purchases during the month of October (the latest data available – central bank gold purchases are not always reported completely, or in a timely manner, or in some cases ever). This helps to explain the strength in the gold price during October on the basis that it was materially above the 20-30 tonnes per month 12-month average. The continued momentum notwithstanding the recent price appreciation is a positive factor.

You will recall that central banks have accounted for over 20% of total gold demand since the second quarter of 2022 when Russia invaded Ukraine (and Russia’s foreign currency reserves were frozen) which is more than double the post-financial crisis average of approximately 10%.

We believe that elevated gold demand from central banks is a secular trend (a robust, longer-term trend). We also see genuine potential for this level of demand to increase materially, driven by an acceleration to the established trend within central banks of reserve diversification (reducing exposure to US Treasuries and the US dollar). There has been a clear and measurable decline in the share of US Treasuries held by central banks since early 2024 which stands in contrast to the post-financial crisis decade (during which foreign official holdings of US Treasuries steadily increased). We believe that President Trump’s unpredictable polices are likely to accelerate this trend, rather than decrease or reverse it.

Further, we believe the higher and higher prices at which central banks have been purchasing gold, especially over the last 12-months, has the potential to create a floor under the gold price, or a dynamic akin to a ‘central bank put’.

Central banks other than the US Federal Reserve hold approximately US$4 trillion of US Treasuries. Substituting just 1% of these holdings for gold over a 12-month period would roughly double the rate of gold demand growth (we estimate that it would increase total global gold demand by approximately 0.8% relative to gold demand which grew at 0.7% year-over-year in 2024). You will recall that gold demand grows very slowly (demand growth has averaged 1% per annum over the last 10-15 years), so even substituting a relatively small amount of US Treasuries for gold would stand to have a significant impact on the price of gold.

What if central banks substitute US Treasuries for gold more rapidly?

The amount of gold required to substitute 10% of non-US central bank holdings of US Treasuries is equivalent to all of the gold presently held in gold bullion ETFs globally (approximately 3,700 tonnes valued at approximately US$500 billion). Equivalent to nearly 75% of annual demand and equal to all of the gold mined annually.

What is driving aversion to US Treasuries?

It is no longer certain that US Treasuries are the lowest-risk, highly liquid asset class. The unprecedented amount of debt at federal level (nearly US$38 trillion) in the US combined with eye watering federal government budget deficits (the 2025 budget deficit was projected at US$1.9 trillion prior to the One Big Beautiful Bill Act being passed, which is expected to see it increase) are undermining confidence in US Treasuries and the US dollar.

As a result, the volatility of US Treasuries has increased materially (c.60% since 2022) with the so-called ‘safe haven’ asset class behaving more like risk assets such as equities. You will recall that for most of the past 30 years (including the mid-2010s through 2020), the stock-bond correlation was close to zero (or negative). In 2025, the 3-year correlation hit a 75-year high (an r² of nearly 0.7 to equities).

The low confidence in US Treasuries (and absence of safe haven characteristics) was evident during the recent ‘Liberation Day’ market stress when 10-year US Treasury yields spiked sharply by 64 basis points within just two days, marking one of the largest two-day increases on record.

Gold-backed ETFs

You will recall that gold bullion ETFs are the most dynamic variable in the gold market on the basis that their behaviour is cyclical and can contribute materially to both demand and supply (depending on whether they are in an accumulation or liquidation cycle). The key driver of these cycles are real yields (therefore the US interest rate cycle and inflation expectations) and the US dollar (on the basis that gold is priced in US dollars, so the gold price typically moves inversely to the dollar’s value).

November saw net inflows into gold bullion ETFs of 38.5 tonnes. While the inflows were below the prior month, we took the momentum as a positive indicator given the recent strong gold price appreciation. ETFs remain in an established accumulation cycle which we expect to be a material tailwind over the next 1-2 years at least, on our base case, coincident with the present US easing cycle.

Ultimately, we believe gold demand from ETFs is a potential catalyst for the gold price to be driven considerably higher than present levels. We reflect on the immaterial penetration of gold as an asset class in exchange-traded investment markets – the market capitalisation of all the gold bullion contained in ETFs globally is approximately US$530 billion (just over one-tenth of Nvidia’s market capitalisation).

While total ETF gold holdings are volumetrically equal to the highs achieved during the COVID-19 pandemic (3,932 tonnes relative to 3,929 tonnes in November 2020), this volume is immaterial in the context of the total physical gold market, accounting for less than 2% of all above-ground gold in existence in its various forms. We see considerable potential for the demand for gold from exchange-traded investment markets to increase substantially.

We reflect that gold bullion is the only major commodity or asset class which has never been sought after by the world’s most influential demographic (the US consumer). In fact, it was actually illegal to own gold in the US between 1934 and 1974. We see considerable scope for US consumers to materially increase their allocation to gold in the present environment.

Technical observations

Momentum, as measured by the 14-day relative strength indicator (RSI), started the month at a neutral level (a reading of 51) and ended the month approaching overbought levels (at a reading of 65). During a period of intramonth weakness, we observed downside resistance at just above US$4,000 per ounce. In the event of more protracted weakness in the short-term, we anticipate US$4,000, US$3,700 and US$3,500 per ounce (corresponding with the 50-, 100- and 200-day moving averages) providing key resistance levels. It would be a progressively more bearish indication if these were to be breached on a deeper pullback.

Gold futures

The publication of the Commitments of Traders reports are yet to recommence following the temporary closure of the Commodity Futures Trading Commission during the US government shutdown.

Outlook for the gold price

The gold price experienced a wide trading range during November (US$3,932 to US$4,239 per ounce) before ending the month at its highs US$4,239 per ounce (+5.9%).

While gold’s fundamentals remain strong, driven by tight supply and robust demand (central banks seeking to diversify away from US Treasuries and exchange traded funds which remain in an accumulation cycle), we believe gold’s recent strong performance needs to be consolidated.

It is critical to appreciate that we haven’t seen a demand environment like this ever before – the last major uptrend from 2001-2011 was driven by ETFs accumulating gold for the first time and gold miners closing out hedge books, while central banks were actually selling gold. This strong demand, combined with a tight supply side (gold mining accounts for approximately three-quarters of total gold supply) creates a strong fundamental basis for higher gold prices. On our base case demand scenario, we assume the period of supply rebalancing will last 5-6-years and drive the gold price considerably higher than present levels.

Further, we believe we may be observing the early stages of a third leg of material gold demand growth – from the fledgling stablecoin industry (which we have elaborated on in a separate paper). This is a dynamic and evolving issue to monitor, which skews the risk to gold demand to the upside.

While gold is trading near to all-time-high prices (in both nominal and real terms), our analysis of the gold mining industry and the supply cost curve indicates that incremental increases in demand will drive the gold price materially higher (the equilibrium price is being driven up the steep tail of the cost curve).

Gold mining has experienced under-investment for more than a decade (since the end of the last cycle in 2011) and this period of neglect means the industry will be less able to respond quickly to demand shocks. We anticipate that the mine supply of gold will tighten further in the short-to-medium term, as some producers pursue a ‘mine life over value’ strategy by lowering cut-off grades (this is a characteristic cyclical reaction) which is fundamentally supportive of a higher gold price by both reducing supply and steepening the cost curve.

Gold mining equities

Gold miners (GDM Index +15.1%) rallied, outperforming gold bullion and displaying their characteristic ‘leverage’ to the price of gold bullion. We maintain our conviction that the re-rate trade (where the very strong fundamentals of gold miners is recognised, attracting capital flows and driving valuation multiples materially higher towards fair value) that we have been writing about since mid-2024 has finally started.

We believe markets are beginning to recognise the strong fundamentals of many gold miners (i.e. EBITDA margins comparable to Nvidia, un-levered balance sheets, trading on valuation multiples below fair value and historic norms while providing considerable leverage to higher gold prices).

Outlook for gold mining equities

You will recall that the key factor driving the performance of gold mining equities is each company’s operating profit margin, which typically expands (and contracts) by roughly double the movement in the gold price. Gold miners are therefore described as ‘leveraged’ to the gold price.

We expect gold miners to outperform gold bullion and global equities, driven by their profit margins expanding by more than the movement of the gold price. We also expect valuation multiples on gold miners to expand as they normalise from cyclically depressed levels.

It is noteworthy that in recent years, gold mining stocks have not been exhibiting this characteristic relationship to the gold price. For example, during 2024, the gold price strengthened by 26.7%, whereas the index of gold mining stocks only appreciated by 9.2%. Going further back to the peak of the last gold cycle in August 2011, the gold bullion price has appreciated 123.4% while the gold miners index has only risen 25.6%. At that time, we estimate that the top-5 gold producers by market capitalisation were trading on 29 times one-year forward price-to-free cashflow (relative to fair value at approximately 20-22 times) whereas the same cohort is trading on less than 10 times presently.

The recent strengthening of the gold price (and therefore expansion of gold mining profit margins) has not been reflected in stock prices. We believe this is on account of the fact that it has been easy to ignore the sector for the last 10-12 years, since the peak of the last cycle and a run of disappointments. Gold miners have remained off the radar for the majority of investors on the basis that they are immaterial within global equity indices, technically complex, deeply cyclical, and have been overshadowed by miners exposed to more exciting metals such as copper, lithium, rare earths and uranium, etc.

We believe one of the factors contributing to dislocation is the apparent divergent forecasts for the gold price between gold bullion traders and gold mining equities analysts which we have examined in a separate report. When it comes to forecasting the gold price, we encourage investors to consider the forecasts from the investment banks which actually trade gold bullion (and are therefore qualified to opine on it). This cohort of banks are upgrading forecasts to levels much higher than the current spot price on a 12-month view.

We see this disconnect as temporary and a significant opportunity which markets are only just beginning to recognise. We believe a normalisation (a mean reversion of valuation multiples on gold miners back to long term norms) is inevitable driven by the bull market in gold bullion and equity investors seeking gold mining equities’ strong fundamentals and compelling valuations.