The below presentation was created for Monex Precious Metals. We would like to thank Monex for making this presentation available free of charge. Visit them at www.monex.com to learn how they can help you with your precious metals investment needs.
Precious Metals Outlook 2023: Strong Foundations Amid Global Uncertainties
The state of the precious metals market in 2023, especially gold, was put under the microscope. The consensus? The fundamentals for gold remain robust, even in the face of market fluctuations.
Supply and Demand Dynamics
Supply: Gold mine production peaked in 2017. While there has been growth in the subsequent years, it’s been marginal, under 1%. This subdued growth means the rate of gold supply into the market is slow.
Fabrication Demand: The primary use of gold—around 80 to 90 million ounces of the 120 million ounces that enters the market—is in jewelry and electronics. Although there was a period of weakened demand in these sectors, especially last year, there’s a resurgent demand for gold jewelry. This has been particularly evident in large markets like China, the U.S., and regions like Latin America and South Africa.
Stock Demand: There’s a distinction between the buying patterns of central banks and investors. Central banks have been net buyers of gold for almost a decade and a half, acquiring it for monetary reserve purposes without a specific selling time horizon. Despite a slight hiccup earlier this year—when countries like Turkey, Uzbekistan, and Kazakhstan sold gold due to foreign exchange reserve shortages—central bank demand remains robust. China’s People’s Bank stands out, having acquired roughly 6-7 million ounces this year.
Investor Behavior and Market Factors
While Central Banks are steadily buying gold, investor behavior showcased a different pattern. In the first half of the year, there was heightened gold investment activity in regions like China, North America, and Europe. The third quarter saw a slight cooldown, but indications suggest a rebound.
Several factors are influencing this investor behavior. Economic, political, and financial market concerns—ranging from governmental stalemates in the U.S. to geopolitical tensions like the conflict between Israel and Hamas—are driving investors toward gold as a safe-haven asset.
