The World Gold Council predicts that gold will experience market turbulence in Q4 2023. After a historic gold-buying spree by central banks propped up the precious metal’s price, gold has seen its performance wane in recent months amid increasing inflation and higher interest rates.
Gold prices went down by 3.7% last month, the World Gold Council reports, and the organization expects market turbulence in the last quarter of the year to place further pressure on gold prices. The precious metal typically performs strongly during uncertain times, but high interest rates coupled with a strong dollar reduced interest in gold as investors turned their attention to interest-paying assets.
According to the council, an unexpected spike in long-term bond yields in September also challenged gold and contributed to its drop. The council notes that gold will likely face more turbulence over the next couple of weeks, thanks to surging bond yields and a buoyant economy. Gold prices ranged from $1,900 to $1,950 for most of September but dropped to $ 1,871 on Sept. 27, 2023, and finished the month at a 3.7% month-on-month loss.
On top of dampening gold prices throughout the month, a stronger greenback contributed to modest month-over-month drops in the pound, yen and euro.
A gold model from the World Gold Council suggests that higher opportunity costs were largely to blame for the drop in gold prices. A 2.5% rise in U.S. dollar value in the DXY index coupled with a nearly 50bps gain in U.S. 10-year yields also contributed to gold’s downward performance.
However, the council’s GRAM model indicates that increasing opportunity costs weren’t strong enough to explain the price drop in late September. The council posits that additional factors such as a significant fall in China’s domestic gold price premium, market overreaction to solid U.S. capital and durable goods data released in late September, and the triggering of gold order limits as prices breached $1,900 aided in gold’s downdraft.
Gold prices remained low in most markets except for the United Kingdom, Japan and Europe as September drew to a close, largely due to surging benchmark interest rates and a stronger greenback. Factors such as rising bond yields and buoyant economic conditions are likely to cause continued gold market turbulence in the near future, the World Gold Council concludes, adding that the gold market will also remain choppy in the near future.
Gold industry actors such as GEMXX Corp. (OTC: GEMZ) will probably keep an eye on this expected turbulence and tweak their medium-term strategies in case they observe patterns that warrant the implementation of strategy adjustments.
NOTE TO INVESTORS: The latest news and updates relating to GEMXX Corp. (OTC: GEMZ) are available in the company’s newsroom at https://ibn.fm/GEMZ
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