April 2023
AME’s Asian and European gold prices jumped 9% on-quarter in the March quarter of 2023 to average US$1,932/oz and US$1,889/oz, respectively.

Prices were propelled to US$2,060/oz by growing safe haven demand amid financial fears following a mini banking crisis and geopolitical tensions, coupled with expectations of a slowdown in interest rate hikes. Despite this pricing movement, AME has retained its forecast of US$1,910/oz for 2023.

Asian gold prices averaged a record high US$1,958/oz in March, while European prices rose to their highest monthly level in 11 months to US$1,914/oz, pushed up by lower yields and, to a lesser extent, a weaker US dollar. Lower bond yields mean less competition for gold, which produces no income, while an ounce of gold is worth more when the greenback declines.

Bond yields collapsed in March—the 2-year US Treasury note yield was around 3.9% on Tuesday, down from 5.1% at its peak early last month. At the same time, bond yields abroad have held up far better, weighing on the US dollar. That reflects expectations of a looming end to the Federal Reserve’s rate-boosting cycle amid rising economic headwinds and turmoil in the banking sector following the demise of Silicon Valley Bank. Higher prices are fuelling flows into EFTs. March saw gold ETFs net inflows of US$1.9bn (+32t) for the first time in 10 months. Still, this was not enough to prevent net quarterly outflows of US$1.5bn (-29t).

AME’s European gold spot price is forecast to remain robust in the June quarter, averaging US$1,910/oz, as the Fed’s tightening campaign winds down, while the global economic recovery remains fragile. The Federal Reserve is expected to increase interest rates by a quarter-point at the next policy meeting in early May as it battles stubborn inflation.

Growing financial risks stemming from unprecedented rate hikes, while stabilised for now, represent upside to gold prices. The US commercial real estate industry is bracing for trouble as the midsize banks that service it become more cautious and less willing to lend in an effort to strengthen their balance sheets after the crisis.

These same factors will push European gold prices to average US$1,900/z this year, rising 5% from 2022. In 2024, we expect European gold prices to rise by 5% to US$1,950/oz as monetary policy eases. Global inflation is expected to fall to 4.3% next year, from 8.8% in 2022.

US gold major Newmont has raised its offer for Australian rival Newcrest to A$29bn (US$19.5bn).  Newmont launched an all-share bid for the Australian miner in February. The rejected bid valued the company at almost US$17bn. Newcrest will open its books to Newmont following the fresh bid, which would see its shareholders control 31% of its American rival.

Higher gold prices will likely mean more deals. In December, Agnico Eagle and Pan American trumped Gold Fields’ offer to buy Canadian gold producer Yamana for US$4.8bn. Consolidation is also being driven by higher costs—namely for labour, diesel, and raw materials. South Africa’s Gold Fields and AngloGold Ashanti said they would combine their Tarkwa and Iduapriem mines in Ghana to create Africa’s biggest gold mine, partly to reduce costs. Production would average 900kozpa for the first five years and 600kozpa over the life of mine.