Insights: Posts from March 2022

Authored by Johan Palmberg and Adam Perlaky: 

• Gold tends to rally when credit spreads widen…
• …but that’s usually the case when the move in credit spreads is driven by broader systemic risks
• US spreads have only recently begun to widen. Should this environment of higher inflation and geopolitical tension draw itself out, widening spreads are likely to signal further support to gold

Global average All-in Sustaining Costs (AISC) in the gold mining industry were US$1,129/oz in Q4’21, almost unchanged from the previous quarter.

Authored by Krishan Gopaul and Johan Palmberg

• The risk of stagflation has increased materially since we addressed the topic last year
• Europe appears to be at greater risk than the US, due to higher exposure to soaring commodity prices and a weaker economic position, but alarm bells could soon ring across the Atlantic, too
• Year-to-date, gold has performed well, arguably reflecting the Ukraine crisis and the ongoing reflationary environment
• But should stagflation become widespread it could provide further support for gold as a diversifier and risk hedge

Authored by Louise Street and Johan Palmberg: The conventional wisdom that stocks and bonds are negatively correlated is a central component of most asset allocation strategies. But the correlation hasn’t always been negative – far from it, in fact – and there are increasing signs of strain in the relationship, prompting investors to ask: could the stock-bond correlation flip? In this blog, we consider that possibility, what it might mean for the average portfolio, and how gold could help to protect portfolio performance.

Commodities are on a tear in 2022, driven by consumer spending, supply chain issues and most recently, tensions with Russia. 

Gold surged past US$2,000/oz earlier this week, nearly reaching the previous 2020 record. This time, though, it was driven by continued concerns about the war in Ukraine, swelling commodity prices, and, more generally, the potential implications for the global economy. And while the gold price has come down from the week’s high, it’s still approximately 4% higher month-to-date. Against this backdrop, we are addressing the three questions investors have asked us most frequently in recent days.

Retail demand weakened as a sudden spike in the gold price resulted in the postponement of gold purchases in the second half of the month.

Due to fewer working days in the month and manufacturers’ active replenishing ahead of the Chinese New Year (CNY) holiday, gold withdrawals from the Shanghai Gold Exchange (SGE) in February fell m-o-m.

On International Women’s Day we celebrate the social, economic, cultural and political achievements of women.

Following a strong 2021, in which central banks accumulated 463t of gold, today we’ve released the first set of central bank gold reserve data for 2022.

What impact will the emergence of central bank digital currencies and cryptoassets have on the gold market? Find out in this podcast by OMFIF, featuring our Chief Market Strategist, John Reade.