October 11, 2022

LBMA Precious Metals Market Report: Q3 2022

A Reflection of the Dollar

A headline which appeared via CNBC at the beginning of the third quarter 2022, and which was in various forms repeated ad nauseam across the media, serves as an appropriate commentary for gold during the succeeding three months: “Gold heads for weekly dip as hawkish central banks dull appeal.”

Gone were concerns about the Covid-19 pandemic, the ongoing Ukraine/Russia war attracted headline attention only periodically. All this, with the exception of the funeral of Her Late Majesty Queen Elizabeth II, was replaced on front pages by concerns about real inflation, potential recession and how the western world’s central banks were reacting.

Among this ‘hawkish’ group, none has proved more so than the Fed, which, towards the end of September released median projections showing that they anticipate the target fed funds rate to be 4.4% by the end of 2022. In so doing the Fed added a further boost to the strength of the US dollar which had already been on an upward trajectory through the first half of the year.

With little variation, the gold price in Q3 inversely reflected the dollar’s increasing strength. Gold started the quarter at $1795.65 and by 30 September 2022 had fallen 6.9% to $1671.75. In so doing, it touched a low of $1618.20 on 28 September 2022, a level not seen since the Covid-19 shutdown of early 2020.

Trading volume during the period was strong by comparison to the year-to-date daily average of 30.93m oz. During Q3 daily turnover was $33.04m oz, over 6.8% higher. Turnover value was, at $56.97 bn, only fractionally above the year-to-date (YTD) figure.

A more formal illustration of gold’s temporary portrayal as a currency play came from price comparison to non-dollar currencies. In sterling terms, for example, the London price of the metal touched £1530.23 on 26 September 2022, only £34.14 below the all-time high achieved in early August 2020. Through the first three quarters of the year while sterling declined 10.6% vs the dollar, the gold price rose 12.2% in sterling terms.

By comparison, the silver price was less unidirectional than gold. Silver gained 1.7% in July, followed this with a 12% decline in August, recovering by nearly 9.5% in September to post a 3.6% loss for the quarter. At the same time, the 2022 decline in silver stocks held in London vaults continued with 28,506 tonnes recorded at end-August, a decline of 3.62% on July, and the lowest figure since reporting began in July 2016.

Like gold, silver recorded a relatively strong quarter in turnover terms with some 332.42m oz changing hands daily by compared to the YTD average of 322.16m oz. Perhaps reflecting the ongoing demand for physical metal, it is interesting to note by comparison to the first half of 2022, the Q3 turnover was 4.85% higher. The value of silver traded in Q3 was, however, significantly down: $6.39bn average per day in Q3 as against $7.06bn YTD.

Key Statistics: 2022 YTD and Q3, 2022

Gold - 2022 03 2022
Performance 4 Jan – 30 Sep -7.6% 1 Jul – 30 Sep -6.9%
Price High – 8 Mar $2039.05 Price High – 4 July $1808.40
Price Low – 28 Sep $1618.20 Price Low – 28 Sep $1618.20
Low/High range 26.0% Low/High range 11.75%
Volume High – 9 Mar 49.7m oz Volume High – 26 Sep 49.1m oz
Value High – 9 Mar $98.9bn Value High – 26 Sep $80.7bn
Average daily volume 30.93m oz Average daily volume 33.04m oz
Average daily value $56.29bn Average daily value $56.97bn
Silver - 2022 Q3 - 2022
Performance 4 Jan – 30 Sep -16.9% 1 Jul - 30 Sep -3.6%
Price High – 19 Apr $25.915 Price High – 9 Aug $20.600
Price Low – 1 Sep $17.770 Price Low – 1 Sep $17.770
Low/High range 26.9% Low/High range 15.9%
Average daily volume 322.16m oz Average daily volume 332.42m oz
Average daily value $7.06bn Average daily value $6.39bn