October 2023 Market Roundup

Precious Metal Prices

As we enter the middle of October, precious metal prices continue to be affected by ongoing economic and geopolitical activity. Gold, silver, and platinum have experienced significant price shifts in recent days, drawing attention from investors and analysts alike.

The month began with gold prices at $1831.85 per troy ounce, experiencing a significant drop from the highs of $1944.30 seen at the start of September. The initial decline can be attributed to a surge in US treasury yields, which resulted in the largest weekly drop in the price of gold in recent months, sending the gold price to near seven-month lows [1][3]. The US Federal Reserve indicated the possibility of another rate hike before the year's end and signalled a reduction in anticipated rate cuts for the following year [2].

Gold Price Rise

However, recent geopolitical events have introduced fresh dynamics to the market. Violence in the Middle East, triggered by Hamas' attack on Israel, has intensified gold's appeal as a safe-haven asset in times of crisis. This development has led to a sharp increase in gold prices, reaching a monthly high of $1,852.30 on the 9^th of October.

Silver, trading at $21.65 on the 9th of October, has witnessed a somewhat steadier decline compared to gold, although prices also fell short of highs of $24.64 at the start of September. The recent Fed comments hinting at higher interest rates have had a downward effect on silver prices, as they have on gold, though the prices have marginally rebounded in recent days due to the ongoing conflict.

Looking Ahead at the Gold Market

Looking ahead, the precious metal market remains sensitive to economic data, interest rate decisions, and the overall global economic and geopolitical landscape. The US economic calendar has a number of noteworthy events in the weeks and months ahead, including labour data and statements from Fed Chair Jerome Powell, whose comments are closely monitored for their impact on precious metal prices. Similarly, with the events in the Middle East still rapidly unfolding, many will be watching for the effects on commodity and precious metal markets alike.

Central Banks Ongoing Golden Commitment

The buying and selling activity of central banks across the world has always played a pivotal role in the precious metals landscape, particularly in the context of gold. Recent reports highlight a robust resurgence in central bank demand for gold, marking an upward trend that counters net negative demand observed earlier this year [4]. Notable contributions to this resurgence include the People's Bank of China, which added 29 tonnes to its gold reserves in August, part of a consistent streak of buying that commenced in November the previous year [4]. China's gold reserves have increased by 155 tonnes year-to-date, valued at approximately $9.1 billion as of the most recent data [5]. This strong central bank buying activity has positioned central banks on a path of significant gold accumulation, potentially exceeding 350 tonnes in net annual demand [4]. Other central banks, such as the National Bank of Poland, the Central Bank of Turkey, and the Reserve Bank of India, have also added substantial amounts of gold to their reserves in recent months [6]. These developments in central bank gold buying reflect the metal's enduring appeal as a safe-haven asset, particularly amid concerns of economic slowdown and rising interest rates worldwide.

Is Platinum Bullion an Undervalued Investment Opportunity?

Despite platinum coins and bars, including the platinum Britannia range, being available as an investment opportunity for a number of years, some traditional precious metal investors might overlook the investment opportunity that platinum has to offer. A recent study by the World Platinum Investment Council revealed a 5% decrease in platinum supply in Q2-23, mainly due to a decline in South African mining output, highlighting the metal's sensitivity to supply changes [9]. While China's economic outlook and jewellery sales impact platinum demand, a surge in investment demand for platinum bars and coins by 300,000 ounces YoY in Q2-23 could indicate growing interest due to the metal's low price. Projections show a 1-million-ounce deficit in 2023, but this is contingent on platinum prices rising significantly [9]. Although challenges like sustained inflation and reduced consumer purchasing power exist, the rebounding car manufacturing sector may boost platinum demand in the months to come. This is because vehicle manufacturers are one of the key consumers of platinum, and vehicle production is moderately higher than expected. There is also increased penetration of hybrid and electric vehicles in the sector, where platinum, much like other PGM metals, plays an important role.

Is There a Silver Lining on the Horizon for the Silver Market?

This year has been somewhat turbulent for silver. Prices hit a monthly high of $21.65 in recent days, a significant drop from the levels above $26 seen at the beginning of the second quarter. However, there is potential optimism, as silver may stand to benefit from the growing reliance on sustainable energy sources. The Silver Institute reports that the demand for photovoltaic cells (PV), which are crucial components of solar panels, is predicted to rise. Since 2014, silver demand in the industry has tripled and is expected to account for 14% of total silver demand this year. [10]. While advancements in solar panel design may reduce silver consumption, the primary production of silver is closely tied to other metals, leading to an unprecedented tightening of the silver market that hasn't been seen in decades.

Silver bridges precious and industrial metals, making it attractive to many investors. Its historical role as a currency and store of value can offer an accessible alternative to gold, particularly for budget-conscious investors. Abundant in the Earth's crust, silver finds diverse applications in electronics, renewable energy (solar panels), and medicine, and serves as an inflation hedge with an inverse correlation to the U.S. dollar. In addition, the low correlation with equities and bonds could make it an appealing option for portfolio diversification and a valuable tool for risk management in the metals market.

The Royal Mint Adds to the Britannia Bullion Series

The Royal Mint has introduced the 2024 Britannia bullion coins, offering investors and collectors an opportunity to acquire these iconic pieces of British numismatic heritage. The coins bear the official coinage portrait of King Charles III on their obverses, designed by Martin Jennings, with the reverse featuring the Philip Nathan rendition of the Britannia design which has adorned the series since 1987. Britannia, a symbol deeply intertwined with British identity is depicted on the range with elements representing the nation's values, including a shield for protection, an olive branch for peace, and a trident symbolising the maritime connection. These coins not only hold historical significance but also incorporate modern security features, such as a changing latent image and micro-text, assuring their authenticity and appeal to investors. The range includes various sizes and materials, with additional releases planned for late 2023 and early 2024 [7].

The contents of this article, accurate at the time of publishing, are for general information purposes only, and do not constitute investment, pensions, legal, tax, or any other advice. Before making any investment or financial decision, you may wish to seek advice from your financial, pensions, legal, tax and/or accounting advisors.

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References
[1] - Losing shine? Investment demand for gold plummets to four-year lows – Economic Times – India – October 1^st 2023 - https://economictimes.indiatimes.com/markets/commodities/views/investment-demand-for-gold-plummets-to-four-year-lows/articleshow/104071683.cms

[2] - Precious Metals Feel The Heat As Fed Keeps Interest Rates High – Oil Price, October 3^rd 2023 - https://oilprice.com/Metals/Gold/Precious-Metals-Feel-The-Heat-As-Fed-Keeps-Interest-Rates-High.html

[3] - Gold and silver prices languish near seven-month lows – Business Today – October 4^th 2023 - https://www.businesstoday.in/personal-finance/news/story/gold-and-silver-prices-languish-near-seven-month-lows-400679-2023-10-04

[4] – Precious Appraisal – No 34, 9^th October 2023 – Heraeus - https://www.heraeus.com/media/media/hpm/doc_hpm/precious_metal_update/en_6/Appraisal_20231009.pdf

[5] - China Central Bank Adds More Gold Amid Elevated Local Premium – Bloomberg October 7^th 2023 - https://www.bloomberg.com/news/articles/2023-10-07/china-central-bank-adds-more-gold-amid-elevated-local-premium

[6] - Central bank demand still sizzling in August – World Gold Council, 4^th October 2023 - https://www.gold.org/goldhub/gold-focus/2023/10/central-bank-demand-still-sizzling-in-august

[7] – Royal Mint Issues First 2024 Britannia Bullion Coins – Coin News, October 3^rd 2023 - https://www.coinnews.net/2023/10/03/royal-mint-issues-first-2024-britannia-bullion-coins/

[8] - Is Platinum Bullion An Overlooked High Potential Investment Prospect? – New York Tech for MSN News, 1^st October 2023 - https://www.msn.com/en-us/money/markets/is-platinum-bullion-an-overlooked-high-potential-investment-prospect/

[9] – Platinum Quarterly Q2 2023, World Platinum Investment Council, 6^th September 2023 - https://platinuminvestment.com/files/419953/WPIC_Platinum_Quarterly_Q2_2023.pdf

[10] Silver to benefit from solar sector demand once rates peak, Reuters, September 29^th 2023 - https://www.reuters.com/markets/commodities/silver-benefit-solar-sector-demand-once-rates-peak-2023-09-29/