Welcome to SurvivalBlog’s Precious Metals Month in Review, where we take a look at “the month that was” in precious metals. Each month, we cover gold’s performance, and the factors that affected gold prices.
What Did Gold Do in November?
Gold prices began November trending around $1,990 before falling to a monthly low of $1,938 on the 10th. Prices then began a strong rally to break above $2,000 by the 21st, then hit successive six-month highs as it broke above $2,050, considered the last major resistance point before hitting all-time highs. Closing gold prices for November peaked on the 28th, with futures settling at $2,067 an ounce and spot gold closing at $2,042.
Factors Affecting Gold This Month
FED FORECAST
War in the Middle East had less of an effect on gold than increased expectations of a Fed rate cut in the near future. From a “hawkish pause” in interest rates on November 1st, the Fed talked tough on “higher for longer” and reserved the right to hike rates again if inflation didn’t keep falling.
On the 10th, Powell reiterated his stance that there was little confidence inside the Fed that they had done enough to bring down inflation. Other Fed officials also raised doubts that inflation was on a sustained downward track.
The mood at the Fed began to change in the latter half of the month, culminating when Fed Governor Christopher Waller said he was “increasingly confident that policy is currently well-positioned to slow the economy and get inflation back to 2%.” He added that if inflation consistently declines, there would be no reason to insist on really high rates.
This sent the market into moving forward estimates of when the first rate cut would be. At press time, the CME Fedwatch interest rates tool had a 96% chance of no rate hike next month, a 92% chance of no rate hike in January, and a 43% chance of a rate cut in March.
Odds increase in May, with a 49% chance of the first rate cut happening then, and a 26% chance of a second rate cut (which assumes a rate cut in March).
DOLLAR
Dollar weakness in the latter half of the month provided a strong tailwind for gold. The DXY began the month in overbought conditions around 106.70, but fell below 106 for good for November on the 6th. The dollar remained between 104 and 105 for only three days, then a week between 103 and 104 before falling below 103 for the rest of the month.
BONDS
Headwinds in the bond market also turned into tailwinds for gold as the month wore on. From beginning just under 5%, the yield on the 10-year Treasury fell to a monthly low of 4.271% by the end of the month. Lower yields resulted from softening inflation and growing expectations that not only had interest rates peaked, but the Fed might make its first rate cut before next June.
Central Banks
The Bank of England kept rates at 5.25% this month but loaded its statements with warnings about persistently high inflation. UK inflation has plunged since October, mainly on lower energy prices, but the BoE wants to see core inflation log persistently lower levels before easing its vigilance.
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The ECB is taking the same tack, warning markets that it is not planning to cut rates in the foreseeable future despite inflation collapsing to 2.4%. The ECB waited too long to raise rates when inflation spiked and is now gun-shy about easing too early.
HUGE drops in energy costs were the main drivers of lower inflation in both the UK and EU.
Central Bank Gold Purchases
The World Gold Council central bank gold report for September reveals that ten central banks purchased 78 tons of gold between them for the month. Two central banks, Kazakhstan and Mongolia, made tiny sales of 0.8 and 0.2 tons, respectively.
The big buyer in September was (big surprise!) China again, purchasing 26.1 tons They were followed by Poland (19.3 t), Uzbekistan (9 t), Turkey (7.7 t), and India (7.1 t).
Qatar continues to diversify from the dollar, purchasing 1.6 tons of gold. Kyrgyzstan adds 3.2 tons, and Singapore continues to build up its gold reserves, buying 1.3 tons. Serbia made the smallest gold purchase in September, at 0.2 tons (200 kg).
Gold ETFs
Global gold-backed ETFs saw net outflows for the fifth month in a row in October.
North American gold ETFs lost 27.5 tons, mostly in the US. 10-year Treasury yields hitting a 16-year high was a major reason.
European ETFs lost 11.3 tons for the month, with German gold ETFs accounting for 8.5 tons of that shortfall.
Asian ETFs posted a minor gain of 1.3 tons, split between India and Japan.
“Other” ETFs saw a net 1 ton of inflows, from South Africa and Turkey.
(“Other” are Australia, South Africa, Turkey, Saudi Arabia, and UAE.)
On The Retail Front
Since the US Mint reports bullion coin sales with a lag, I report the final numbers for the previous month here before going into the preliminary numbers for the present month.
Final numbers for US Mint bullion sales in October show 3,938,000 ounces of American Silver Eagles, 108,000 ounces of American Gold Eagles, and 36,500 ounces of American Gold Buffalos sold.
Preliminary November bullion sales are 2,378,000 ounces of ASEs, 47,000 ounces of AGEs, and 11,500 ounces of Buffalos.
Market Buzz
Gold prices dropped in late October just in time for jewelers to load up and prepare for the Diwali festival this month, sending gold imports 60% higher than last year. 41 tons of gold jewelry and 400 tons of silver jewelry were sold during this year’s festival, which is largest gold-buying occasion in India.
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Jan Nieuwenhuijs at Gainesville Coins reports on the Netherlands announcing that it has finished equalizing its gold reserves in “Dutch Central Bank Admits It Has Prepared for a New Gold Standard.”
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Goldman Sachs said late in the month that “the shine is returning” to gold as prices hit six-month highs and bets on the Fed cutting interest rates gained traction.
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Gold isn’t the only precious metal experiencing a big rally. Silver prices are ending the month above $25 an ounce.
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Heavy demand has pushed the platinum market into a 1.1 million-ounce shortfall so far this year.
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It’s the opposite for palladium. Palladium prices have fallen 40% this year, to five-year lows.
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Looking Ahead To Next Month
Gold did its best to get into the neighborhood of all-time highs this month. I expect a correction in early December, followed by a rally into the end of the year. Maybe Santa will give us new record gold prices for Christmas?
This is assuming that various Fed officials continue with dovish remarks on interest rate policy now that Fed Governor Christopher Waller has broken the taboo of speculating that the next action of the FOMC will be a rate cut.
The dollar may reach oversold conditions in early December and rebound, which will have a dampening effect on precious metal prices.
Our treasure story this month comes from Poland, where local relic hunters were looking for relics from the WWII Battle of Stettin between the Wehrmacht and the Red Army. What they found was beyond their wildest dreams: a stash of 70 gold coins buried in a corroded metal can. The coins included one US Coronet Double Eagle $20 gold coin and several US $10 gold eagle and $5 half eagle coins, mixed in with lots of Russian 5 and 10 ruble gold coins.
Note: This column is intended for educational purposes only. It is not intended as investment advice. Past performance does not guarantee future results.
– Steven Cochran of Gainesville Coins