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Gold has recently regained and surpassed the psychologically important $2,000 per ounce level. Though that fact alone is hardly impressive (the precious metal is -2.4% YTD), within the context of the US dollar on solid footing and continuing outflows from ETFs, the recent price strength to $2,040 has been impressive.
Certain headwinds: Given the most recent US CPI data which illustrated the fact that inflation remains sticky, the frequency and magnitude for 2024 rate cuts has been somewhat tempered. This has kept the dollar on firmer ground which intuitively/historically, is a headwind to gold. Additionally, the ETF outflows have continued. The month of January kicked off 2024 with the eight consecutive monthly outflow as global gold ETFs fell by 51t to reach 3,175t. Meanwhile, total AUM declined by 2% to reach $210.0B. For added context, holdings were 19% below the peak month-end in October 2020 (3,915t) while AUM was 13% below the August 2020 all-time high of $240.0B.
Certain supportive factors: The latest Swiss gold export data showed that January shipments nearly doubled month on month to reach 207t. Fueled by the Year of the Dragon, half of those exports were specifically exported to mainland China and Hong Kong. The strong monthly export number points to the highest level since December 2016. The consistent pricing premium of Shanghai over London signals the solid domestic appetite. This strong Chinese demand is underpinned by weak domestic equity performance and persistent unease over domestic real estate.
As can be seen above versus a basket of liquid commodity futures, gold has held its own since 2023 (+8.8%), let alone going back 10 years to 2014 (+63.8%). For what its worth, silver futures have declined by -2.9% since 2023 and increased by +15.1% since 2014.
Note that natural gas futures remain as volatile now (-62.6%) as since 2014 (-63.8% to date despite a peak of +125% to August 2022) as volumes currently remain high amid a much warmer than anticipated winter.