Metals to ourperform ASX in 2023
Metals To Outperform ASX In 2023
The end of 2023 is fast approaching. With less than one month to go, it seems very likely we’ll see an outperformance from gold and silver for local investors this year. The ASX 200 index is up by just over 2% year-to-date, with inflation adjusted returns in the negative, as Australia’s inflation rate tracks over 5%.
2023 posed a difficult year to navigate financial markets, with the significant interest rate rises leading to weak performance for the ASX. The question for gold and silver was whether or not they could once again prove themselves as a hedge against inflation. We see in the below chart that the year-to-date $AUD return for gold currently sits over 12%, and over 7% for silver.
Despite higher interest rates seeing improved bond yields and higher opportunity costs from deposit accounts, we think this is quite a strong performance for the metals, given the current environment. Gold in USD terms also had a strong year, rising from $1800 to circa $2040 at the time of writing.
YTD Returns
Gold (Yellow) vs Silver (White) vs ASX200 (Green)
As we move into 2024, it will be interesting to see how economies hold up under a significant period of higher interest rates. We are also faced with significant geopolitical risks with the war in Ukraine and the Middle East posing a major threat to more broader conflicts. Precious metals are likely to continue to see both safe-haven demand in 2024 as well as Central Bank demand, should inflation persist at a higher-than-expected level.
In USD terms the monthly closing price for the end of November was the highest ever monthly close for gold on record. Keep an eye on the price in the near term, as it is approaching a breakout of all time highs:
Gold & Silver Price AUD — 24hr Update
Current Prices: Gold USD 2036.90/oz (AUD 3083.14) And Silver USD 25.28/oz (AUD 38.35)
Gold prices fell on Thursday but eyed a second straight monthly gain as expectations the Fed could cut interest rates enhanced the appeal of precious metals. Spot Gold was down 0.4% trading near $US 2035 an ounce at the US close. On the other hand, Silver jumped 0.92% trading near $US 25.24 per ounce. Overall, Gold achieved 2.7% and Silver rallied just above 10% for the month.
US sharemarkets were mixed on Thursday. Higher US Treasury yields, which make stock returns less appealing, weighed on equities. But the Dow Jones index hit its highest level in 2023 With around an hour left of trade, the Dow Jones index was up by 380 points or 1.1% and the S&P 500 index gained less than 0.1%, but the Nasdaq index shed 79 points or 0.6%. The Dow rose by 8.3% in November, recording the biggest monthly gain since October 2022. And the S&P 500 jumped 8.6% with the Nasdaq soaring 10.3%, posting the strongest monthly performances since July 2022 and January 2023, respectively.
US government bond yields climbed on Thursday, even after US economic data on consumer spending and inflation provided more evidence the US Federal Reserve could cease hiking interest rates. The annual increase in inflation was the smallest in more than 2½ years. The US 10-year Treasury yield rose by 8 points to 4.35%. And the US 2-year Treasury yield gained 6 points to 4.71%. For the month, the 10-year yield fell by around 57 points, its biggest monthly fall since August 2011.
Currencies were weaker against the US dollar in European and US trade. The Aussie dollar dipped from US66.49 cents to US65.70 cents and was near US66.05 cents in late US trade.
In US economic data, initial jobless claims rose by 7,000 to 218,000 last week (survey: 218,000). Personal income lifted 0.2% in October (survey: +0.2%). Personal spending was up 0.2% (survey: +0.2%). The PCE core deflator rose 0.2% in October to be 3.5% higher than a year ago (survey: 3.5%, prior: 3.7%). Pending home sales fell 1.5% in October (survey: -2%) The Chicago PMI rose from 44 in October to 55.8 in November (survey: 46). Traders have advanced bets for a rate cut from an 80% chance in May to a one-in-two chance in March, according to CME’s FedWatch tool.
Australian gold prices fell by 0.27% ($8.44 per oz) to AUD 3080.62 at the US close.
Australian silver prices gained by 1.08% ($0.41 per oz) to AUD 38.22 at the US close.
The current Gold and Silver USD Ratio is 80.62
Current AUD/USD is 0.66064
