- The best performing precious metal for 2022 was platinum, up 11.33%, with most of the gains coming over the fourth quarter. Although gold didn’t come in on top, investment bank UBS believes there are three structural reasons in favor of the yellow metal in 2023: 1) Long-term investors and the official sector are gradually building gold allocations. For example, central banks have been net buyers of gold for more than a decade now, amid a broader trend of diversifying dollar-denominated reserves. 2) The proportion of gold holdings relative to overall assets held by institutional investors remains light, in UBS’ view, and the bank believes it is likely held more for diversification and portfolio protection rather than expectations of outright material price appreciation. 3) Strong physical demand has also been a key factor affecting the relationship between gold and real rates, in its view. Key physical gold markets India and China have continued to buy large volumes of gold in 2022, helped by cheaper prices as gold came under pressure from other macro forces.
- Deal flow for the royalty sector remains strong heading into the new year, with increased complexity in deal investment structures, partly due to intense competition between royalty companies for quality assets, and $1.2 billion of transactions announced since June 2022. Year-to-date, $2.9 billion has been deployed (one of the highest years on record), driven by sector consolidation. The current deal pipeline remains focused on precious metals streams and development projects.
- Russia’s Finance Ministry announced the doubling of the amount of Chinese yuan and gold it can hold in its national wealth fund, Reuters reported. The upper limit for yuan share would be 60% and the upper limit for gold would be 40%. The fund held $186.5 billion in November 2022. To further internationalize the renminbi, China announced it will extend the trading hours for the onshore yuan to 3 a.m. local time the next day rather than 11:30 p.m. effective Jan. 3, according to the People’s Bank of China (PBOC).
- The worst performing precious metal for 2022 was palladium, down 7.12%, reports Bloomberg. While gold has historically been seen as a haven in times of economic distress, the precious metal slumped over the past month in the face of the U.S. dollar’s relentless gains and hawkish moves by central banks.
- Cost inflation continues to be a key theme for precious metal producers, and against that backdrop, the royalty companies as a group outperformed in 2021, down 4% on average versus the producers, and were down 2% in 2022.
- The World Platinum Investment Council (WPIC) lowered its supply forecast to 7.78 million ounces as it expects lower output from South Africa and Russia. Additionally, the organization estimated supply at 8.18 million ounces earlier this year. The WPIC sees sanctions impacting Russian output and has reduced its platinum surplus outlook.
- Mergers and acquisitions (M&A) should continue into 2023, with numerous senior companies having publicly commented on looking at M&A as part of their growth strategy. Transactions that provide diversification and less risk concentration would garner shareholder support.
- Gold bullion ended 2023 with a final London benchmark price around $1,814 per ounce, down just 0.3% from last New Year’s Eve, writes BullionVault.com. This comes despite the U.S. dollar enjoying its strongest year-on-year jump versus the world’s other currencies since 2015 on the back of the steepest rise to U.S. interest rates since 1980.
- Gold prices have been on a general incline since the beginning of November 2022, writes CNBC, as market turbulence, rising recession expectations and more gold purchases from central banks underpinned demand. Several analysts are projecting record highs for the precious metal in 2023.
- According to Morgan Stanley, gold looks overvalued versus recent moves in real yields, although some support is coming through from still-strong inflation and rising risks of recession, and sentiment could turn if rate expectations start to reverse.
- Although silver prices also rose on the last trading day of 2022, the metal’s annual average fell 13.5% in dollar terms, writes BullionVault, losing $3.40 from last year’s near decade peak of $25.13.
- Google searches for “diamonds” in the U.S. appear to have decoupled from their historical trend of sharply rising into the holiday season. This could be indicative of weakening consumer appetite for these stones, as evidenced by the softening for polished prices across the size spectrum.
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