Insights

This quarter the stand-out story has been Turkey, where exceptional demand has had a material effect on global gold flows. Bar and coin demand, central bank gold holdings and OTC flows were all noticeably affected by what has happened in Turkey during the year so far.

Reported net purchases from central banks totalled 55t, the first month of sizeable global net buying since February.

As in recent months, activity from the Central Bank of Türkiye (CBRT) was pivotal to the global total.

Despite June weakness, the LBMA Gold Price AM in USD and the Shanghai Gold Benchmark PM (SHAUPM) in RMB ended the first half of 2023 higher by 5% and 9% respectively – the depreciation of RMB against the dollar over the period contributed to the significant difference.

SMSF investors continue to face inflationary pressure not seen in decades. And it could influence investment performance if the potential effects are not considered.

Costs in the gold mining industry resumed their upward trajectory in the first quarter of this year. This followed a short-lived break in Q4’22, when gold miners’ average all-in sustaining costs (AISC) had fallen by 1% q/q. Prior to this, costs had risen for the past three consecutive quarters, stretching back to Q1’22.

Gold price weakness in June, according to GRAM, was largely the result of a rise in US Treasury yields, a fall in volatility, US dollar strength and ensuing outflows from global gold ETFs.

Global central banks reported net sales of 27t in May, less than half the net sales seen in April. Excluding Türkiye’s sales, the trend in central bank buying is still in place.

Annual gold production rank in 2022 was unchanged y/y amongst the five largest gold producing nations, with China still the world's largest gold producer. Extending this to the top 20 countries, things look very different compared to 2010. But, more broadly, global gold mine production remains geographically diverse.

Gold prices failed to extend the momentum of the previous month. Factors such as a strong dollar and rising yields weighed on the USD gold price in the month. But due to a 3% depreciation in the local currency against the dollar, the SHAUPM in RMB strengthened.

Central bank gold reserves declined by 71 tonnes in April, primarily due to Turkish selling. Despite this, we expect central banks to remain net buyers in 2023, supported by their overall positive sentiment towards gold reserves.

The latest Gallup Poll Social Series monitoring public opinion on economy and finance shows that gold jumped into second place as ‘best long-term investment’ in the US this year.

Key highlights:

• The LBMA Gold Price AM in USD rose by 0.2% in April while the Shanghai Gold Benchmark PM (SHAUPM) in RMB saw a 0.7% gain, due mainly to a depreciating RMB against the USD 
• The average Shanghai-London gold price premium fell sharply in April amid easing local supply and demand conditions

According to the IMF, reported global central bank gold reserves remained virtually unchanged in March. Available data shows purchases almost perfectly offset sales, resulting in a net increase of 0.2 tonnes.

The 2023 “Shunto” sent positive signals to Japanese employees regarding possible pay increases amid a backdrop of elevated inflation in the region. Shunto – the wage negotiations between major corporations and unions that take place every March – provides pay level guidance for all Japanese employers, large and small.