Monthly report (T8 Gold) – November 2024

Monthly fund update

Key points

• The key factor influencing the gold market during the month was the US election and the much stronger mandate for the Republicans than markets had expected.
• We believe this stronger policy mandate, in the context of President-elect Trump’s relatively extreme rhetoric, rattled markets and drove the powerful intramonth moves in US Treasury yields and the US dollar which was a considerable headwind for gold bullion in the first half of the month.
• This resulted in gold bullion-backed ETFs experiencing their first month of net outflows since April this year. In spite of this, outflows stabilising for the remainder of the month and the gold price rebounding would indicate that investors bought the dip, which is an encouraging sign.
• A blistering rally in Bitcoin is also likely to have contributed to the downward pressure on the gold price.
• Offsetting these negatives, central banks continued purchasing gold at elevated levels, reporting their strongest month year-to-date (central banks have accounted for 20% of gold demand so far this year, more than double the post-financial crisis average of around 10%).
• The most notable buyer was China which made its first purchase since April (China was the largest central bank purchaser of gold during the first quarter of this year and was the top buyer in 2023). We believe China’s resumption of gold buying is a very strong signal especially with the gold price near to all-time highs.
• We believe the higher and higher prices at which central banks have been purchasing gold, has the potential to create a floor under the gold price, or a dynamic akin to a ‘central bank put’.
• Gold mining equities weakened in line with the contraction of their profit margins as a result of the weaker gold price.
• Valuations on gold mining stocks are at what we believe is a 25-year low. We see the dislocation as a significant opportunity which investors haven’t yet recognised.