Gold market update – October 2023

Insights — November 2023

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

Gold bullion rallied by 7.3%, recovering its losses from August and September as investors increased their exposure following the escalation of geopolitical risks in the Middle East. The gold price finished October at US$1,984 per ounce, breaking above its 50-, 100- and 200-day moving averages and posting its best monthly return since March this year.

Sentiment turned positive in gold futures as investors increased their exposure. Long positions rebounded to the top decile over the last three months although remain very light over longer time periods.

Outflows from gold bullion electronically traded funds (ETFs) continued with the largest (SPDR Gold Shares, or GLD) experiencing its fifth consecutive month of outflows. We see considerable potential for this factor to reverse in the short-to-medium term. Gold ETFs are the key swing factor in the gold market, accounting for anything from 20% of demand to 20% of supply.

The stronger gold price had a positive impact on the universe of gold equities which rallied 4.1% over the month.

Silver, which is considered part industrial metal and part precious metal, lagged the rally in gold and rose 3.0% in October. This maintained its considerable underperformance relative to gold on a year-to-date basis (gold +8.8% relative to silver -4.6%).

While precious metals rallied, industrial metals such as copper fell by 2.2% on global economic growth concerns, higher interest rates and a strong US dollar. These factors also saw the price of crude oil retreat by more than 8% during the month (despite the rising geopolitical risks which typically have a positive impact on the oil price).

Macroeconomic fundamentals

The US Federal Reserve has amplified its hawkish stance since July with the aim of reducing inflationary pressures by slowing the US economy.

In October, the trend of the previous three months continued with the yield curve continuing to steepen. Yields on short-dated US Treasury bonds (1- to 3-year maturities) rose less than yields on the 10-year (+36 basis points) and those at the long end of the curve (+20-year maturities which increased by 37 basis points). This was another significant increase in bond yields after the two standard deviation move in the previous month.

The upward movements in the yield curve and a stronger US dollar (which experienced its third consecutive month of positive returns, +0.5% on a trade-weighted basis), typically a headwind for gold, were overshadowed by events in the Middle East which resulted in demand for gold as a safe haven.


In addition to gold receiving safe haven support from the various geopolitical flashpoints globally, we see low-risk appetite in equity markets, rising recession risk, elevated inflation and central bank gold buying as supportive factors in the short term.

Further, despite interest rates in the United States being at their highest level since mid-2007, the rate cycle is nearing its peak (it is certainly much closer to the end than the beginning). The cycle will see rates peak, then pause before ultimately being cut in line with macroeconomic conditions. Lower interest rate expectations under this outlook (which would likely result in lower real and nominal US Treasury yields and place downward pressure on the US dollar) would be a fundamental tailwind for the gold price.

Persistent inflation (or an inflation shock driven by rising energy prices) following interest rates reaching a peak (which is a credible scenario) would be an extraordinary upward catalyst for gold.

There appears to be significant complacency in the market’s outlook for inflation. Consensus assumes that core PCE returns to its target 2-3% range in the short to medium term from the present reading of 3.7% (a key barometer of expectations, the US Federal Reserve Bank of New York survey has inflation falling to 3.0% over a three-year horizon).