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.

