T8 Gold – Market update

Insights — August 2023

We share our latest observations on global asset markets in regard to T8 Gold

The gold price ended the month at US$1,965 per ounce, moving back above its 50-day moving average price and erasing the negative return from June. The sentiment toward precious metals turned positive in July alongside industrial metals (like copper) which continued their rally from the previous month. Silver, considered both an industrial and precious metal due its characteristics and usage, rallied 8.7% in July (partly closing the underperformance gap with gold on a year-to-date basis).

As a result, gold mining stocks generated strong positive returns for the month, with the miners that produce silver by-products leading the way (+6.8%). Producers with silver by-products and senior mid-caps advanced the greatest.

In late July, the US Federal Reserve hiked interest rates by another 25 basis points to slow the US economy and reduce inflationary pressures. After the spike in US Treasury yields in June (especially for short-dated bonds), bond markets responded moderately to the additional hike in interest rates, with yields on short-dated US Treasury bonds (1- to 3-year maturities) staying anchored while 10-year US Treasury yields moved up by 12 basis points (to just below 4%) and the long end of the curve (+20-year maturities) increasing by 16 basis points. These movements in the yield curve (steepening) and a weakening US dollar for a second consecutive month (-1.0% on a trade-weighted basis) were a tailwind for gold bullion. Despite interest rates in the United States being at their highest level since mid-2007, the slower pace of rate hikes, a likely pause and then subsequent rate cuts going forward are supportive for gold especially if the US dollar continues its downward trend.