January 17, 2024

LBMA Precious Metals Market Report: Q4 2023

Reach for New Highs

As the old year turns into the new, teams of economists and analysts deluge the media with forecasts, some of which are intentionally outlandish, designed more to attract headlines than to convey well-researched opinion.

The future gold price is particularly susceptible to this hyperbole. As the LBMA gold price hit a record high price of $2078.40 on 28 December (PM auction), one commentator forecast a breach of the $3,000 level during 2024 for the yellow metal, while a second predicted that it would reach $10,000 by the end of the decade, with silver nudging $300.

Unlikely as these numbers appear, they do reflect increased enthusiasm for gold as a safe haven, prompted in part by the outbreak of the Israel/Palestine conflict at the beginning of October.

Strong Performance

Looking to the end of 2023, the gold price advanced rapidly, breaking through $2,000 on 21 November and holding above $2,000 – except for three days in mid-December – from 24 November onwards. It finished the year at $2,062.40, a gain of 12.59%. Q4’s strong performance is underlined by the fact that the full year gold price rise was 12.39%.

By comparison, gold price moves during the first three quarters of 2023 were, at best, unsustained, despite the 18 days in April and May when the price topped $2,000, as investors responded to the collapse of a handful of American regional banks and the markets waited nervously for the outcome of political wrangling over the US debt ceiling. Underlying this absence of clear direction continued to be the impact of the ‘pushmi-pullyu’ economic climate, again led by the US, with the Federal Reserve and inflation on one side of the equation, and national/international fears of recession on the other.

Optimistic US Outlook

To a large extent, the gold price in Q4 benefitted from an increasingly optimistic US economic outlook. It became clear from the Federal Open Market Committee meetings in September and November that not only were further interest rates rises off the immediate agenda, but the likely next move would be down with a concomitant reduction in the strength of the dollar and thus potential support for the gold price.

Perhaps, but consider the first Reuters report of 2024: “The dollar index rose 0.8% on track for its biggest daily gain since July, supported by higher US yields, making dollar-priced bullion more expensive for overseas buyers.”

According to figures from the economics team of a leading, independent US investment house, the US recession predicted by some 65% of professional forecasters at the beginning of last year failed to materialize. Some 50% of those same forecasters anticipate a 2024 recession, a further positive driver for gold.

But will it occur? No predictions here except to say that the team puts the chances much lower – at 12.5% – in a paper, appropriately named “Avoid being confidently wrong”!

While variant interpretations of the direction of the US economy had, and will undoubtedly continue to have, a day-to-day impact on gold market sentiment, a core support for the gold price through the year was continued buying by central banks around the world – a trend first manifested in 2022 – with some 800t (net) purchased in the first three quarters of 2023.

Central Bank Activity

To the end of November, the People’s Bank of China had been a net buyer for thirteen consecutive months and, just in 2023, was reported to have accumulated over 230t to bring its officially declared stockpile to 2,226t (although many analysts believe the true number to be much higher). The Chinese press reflected this spree in headlines such as “Cultural Affinity for Gold in China”, and from China Daily in October, “Gold becoming the best hedge against geopolitical risks, experts contend.”

Elsewhere, the Naradowy Bank Polski (the Polish central bank), the CBRT (Turkey), and the Monetary Authority of Singapore were also actively in play. In 2023 to the end of October, Poland was reported to have bought over 100t of gold, and Singapore some 75t.

Turkey, on the other hand was a net seller during the first 10 months of 2023, although it bought 19t during October to end the month with official reserves of 498t (WGC).

Inflation, possible recession and geopolitical turmoil also had their impact on the psyche of retail investors. Whereas the high Q4 gold price discouraged Indian retail buying of new gold during the festival season and prompted a focus on recycling gold (reportedly as much as 150t), a recent report from The Business Times (Singapore) tells us that: “Chinese New Year spurs gold demand in China and Singapore, while India discounts widen”. It goes on to quote a Singaporean precious metals dealer as saying that “We see more buying and clients are buying mainly festive bars because the Chinese New Year is coming up and, of course, this year is auspicious year as it is the Dragon year.”

Meanwhile, in the UK, the Royal Mint declared a 7% increase (by comparison to 2022) in purchases of small bars and coins.

Where does all this leave gold price forecasts for the year ahead? As is the normal practice, a straw poll of the record number of delegates at this October’s LBMA/LPPM Global Precious Metals Conference (Barcelona) asked for predictions of the gold (and silver price) at the equivalent October 2024 event (Miami). The consensus was gold $1,990.30, and silver $26.80.

2023 Average Monthly Gold Price

Source: LBMA

Silver

With the exception of American retail investors’ continued enthusiasm for Morgan dollars (400,000 minted in 2023 and initially offered at $80 each), silver is usually and correctly categorised as more of an industrial metal than a perceived safe haven investment (estimates suggest a 60/40 ratio). It is therefore unsurprising that the silver price did not react in the same way as gold to the Q4 geopolitical issues.

Silver opened the quarter at $21.620, 7.62% above its low for the year but 12.27% down from the beginning of September. However, the price then began to pick up steam – probably on the back of increasing US-led economic, and thus industrial, confidence – to top out at $25.165 on 4 December, one of only three days the price breached $25 during the quarter.

From then on, to the end of the year the price lost clear direction, recording 10 down days and six up days, to finish the year at $23.790. This represents a gain of 10.04% during the quarter but a loss of -2.08% for the full year – equivalent to a low/high range of nearly 30%.

Gold - Q4 2023 2023 Full Year
Performance 31 Oct – 29 Dec +12.59% 3 Jan - 29 Dec +12.39%
Price High – 28 Dec PM $2078.40 Price High – 28 Dec PM $2078.40
Price Low – 4 Oct PM $1818.95 Price Low – 27 Feb AM $1809.05
Low/High Range 14.26% Low/High Range 14.89%
Volume High - 27 Sep 45.3m oz Volume High – 4 Dec 57.2m oz
Value High - 27 Sep $91.1bn Value High - 4 Dec $117.2bn
Average Daily Volume 33.6m oz Average Daily Volume 34.0m oz
Average Daily Value $66.3bn Average Daily Value $66.0bn
Silver - Q4 2023 2023 Full Year
Performance 1 Oct - 29 Dec -3.47% 3 Jan - 29 Dec -2.08%
Price High – 4 Dec $25.165 Price High – 14 Apr $26.025
Price Low – 3 Oct $21.055 Price Low – 10 Mar $20.090
Low/High Range 19.52% Low/High Range 29.54%
Average Daily Volume 298.0m oz Average Daily Volume 350m oz
Average Daily Value $7.9bn Average Daily Value $8.2bn

LBMA Annual Precious Metals Forecast

Stay tuned to the LBMA newsroom for the latest LBMA Annual Precious Metals Forecast Survey, set to be published at the end of January. In the survey, analysts from across the globe provide forecasts for the average price of gold, silver, platinum and palladium in 2024. Don't miss their insightful commentary and top three drivers of the gold price due to influence prices throughout the year.