Gold trading is proving to be a turbulent global market, as great emphasis is being placed on the regulation of the gold market in March.
The Bank of Japan’s announcement of ending its negative interest regime and the imminent Federal Reserve meeting led into what could be a volatile few months for some of the world’s most crucial financial markets and, subsequently, our investment tactics.
Gold Trading: Record high prices
Their consequences for gold trading can be incredibly profitable, as the precious metal hit record highs in 2024.
All of this demonstrates that, even in an era of shifting economic policies and currency valuations, the gold trading market continues to be an attractive place for investment.
The current gold trading market is showing great change that offers unique opportunities for metal traders.
For traders, interest rate patterns and policies are at the forefront of strategic considerations, not to mention old bullion-holding central banks that still command great respect in financial markets.
Commodity Markets: Gold Price Soars – Seize Record Highs
Gold trading – Gold prices drop
On March 19, gold prices fell as the dollar grew stronger, anticipating the Federal Reserve’s announcement regarding its interest rate policy after its two-day meeting concluded.
The price of spot gold decreased by 0.3% to $2,154.15 per ounce by noon EDT, close to its lowest point in a week recorded on March 18.
Meanwhile, U.S. gold futures also saw a 0.3% reduction to $2,157.50. The dollar’s 0.3% rise to a more than two-week peak made gold pricier for buyers outside the US.
Gold Trading: Losing momentum
Gold’s recent rally is losing momentum as market adjustments in anticipation of the Federal Reserve’s decisions have been rapid in the last few weeks.
Experts predict neither a significant rally nor a steep decline soon, citing the ongoing strength in physical markets and a generally bullish market posture.
Gold reached an all-time high of $2,194.99 per ounce on March 8, but experienced a drop of nearly 1% last week.
Gold Trading: Interest Rates Hit Markets
This decline followed the release of unexpectedly high US consumer and producer prices for February, diminishing hopes for early Federal Reserve rate cuts amidst ongoing inflation concerns.
The Federal Reserve, expected to maintain current interest rates on Wednesday, has the market’s attention focused on potential insights from Fed Chairman Jerome Powell’s subsequent remarks.
In related developments, the Bank of Japan concluded its long-standing policy of negative interest rates and other unconventional economic strategies.
In other precious metals, spot silver decreased by 0.4% to $24.92 per ounce.
Platinum fell 2% to $894.05, while palladium experienced a 4.8% drop to $982.73.
Gold Trading: Uganda mines in focus
In 2023, Uganda saw its gold exports increase dramatically, more than ten times the previous year’s total, despite facing U.S. sanctions against one of its key gold processing firms.
According to data from the Bank of Uganda released on Tuesday, gold exports from the country reached $2.3 billion, up from $201 million the year before, establishing Uganda as a significant gold trading center in East Africa.
This remarkable growth in exports is attributed partly to the contributions of new processing facilities, including Wagagai Mining Ltd, a Chinese-operated plant located in eastern Uganda, as per Stephen Turyahikayo, a researcher in the mining sector of the Great Lakes region.
Gold Trading: African gold market
Furthermore, an official from the Ministry of Energy and Mineral Development noted that gold exporters benefited in 2023 from a halt in export tariffs on gold.
In 2022, the US targeted Belgian businessman Alain Goetz and his connected enterprises, such as the African Gold Refinery, a major Ugandan gold refinery, with sanctions.
The US alleged Goetz’s involvement in the illegal trafficking of gold from the Democratic Republic of Congo, an accusation he has refuted.
Rights organizations have called on the London Bullion Market Association (LBMA), the authority setting benchmarks for the globally recognized gold market, to enhance efforts to eliminate gold associated with human rights violations or illegal activities from its supply chain.
Gold Trading: Unscrupulous behaviour
According to a letter from a consortium of eight groups focused on mining analysis, refineries accredited by the LBMA continue to procure gold from dubious suppliers and mines.
They have also done so without adequately addressing severe human rights issues and environmental harm.
In response, the LBMA expressed its anticipation of discussing these concerns and various proposals at an upcoming event in London.
The association, responsible for regulating entry to the primary bullion market, has initiated measures aimed at preventing the circulation of contentious gold through its certified refiners and into bank vaults.
Gold Trading: LBMA’s systems
It includes the Good Delivery List (GDL): refiners whose responsible sourcing processes have been screened and approved.
Yet such organizations have noted only small changes in the LBMA’s systems since 2021, with many refiners who are still registered having recently acquired gold from the kinds of suppliers and laundromats alleged in the report.
Other crimes—e.g., environmental pollution, or the breach of human rights – offer an avenue through which such legally mined gold might slip into the international market.
There was no mention, however, of the actual refiners. Instead, the letter simply alluded to cases ‘disclosed in recent years in the international media and in the work of researchers throughout Latin America, Asia, Africa, and the Middle East’.
They emphasized the LBMA in particular as a standard-setter and guarantee of member conduct.
They blasted refiners for not doing enough to engage with mining-affected communities, even as they called attention to the disclosure guidelines as a transparency.
To cite one example, a recent 2023 report discusses the UAE as a key gold exporter to GDL refiners, ultimately a global gold transit hub that doesn’t have any gold mines.
The organizations urged for public reporting on the origins of gold to improve transparency.
At a summit on responsible mineral sourcing to be held later in the week, the LBMA said that it would work to address the concerns of these groups directly.
Gold trading: AngloGold Ashanti production up
The announcement came as AngloGold Ashanti expects to meet its target of gold production of up to 2.79 million ounces for the year, despite flood waters hindering its Tropicana mine in Australia.
This statement came as it reported a net loss of $46 million for 2023.
This loss is due to a reduction in gold sales, costs related to corporate restructuring, higher environmental provisions, and layoff costs.
Other problems include the shutdown of Córrego do Sítio in Brazil, which ceased operations in August 2023.
This is a very different financial outcome from the revised figure of a net profit of $489 million published for the previous year.
The financial statements for 2022 had to be revised because there was a mistake relating to the deferred tax asset reported for the Obuasi mine in Ghana.
The company has revised its short-term gold production expectations for the Tropicana mine, saying that production could dip in the first half of 2024 but recover in the second half.
AngloGold Ashanti is confident that the challenges will not affect its targets to produce 3.2 million ounces of gold at all-in sustaining costs of $900 per ounce for 2024, according to company spokesperson Mark Saunders.
Tropicana, in which AngloGold Ashanti has a 70% interest and which produced 310,000 ounces or 12% of the company’s full-year output in 2023, suffered heavy rain and flooding this month.
Mine operations have been hindered by the flooding, and the processing plant was running at 50% capacity using ore stored in stockpiles. A company statement said.
Market Snapshot – March
With anxious investors calmed by global stocks stabilising while the yen plunged against the dollar to through the symbolically charged 150 level on freshly banked expectations of an end to the Bank of Japan’s negative interest rate policy, a week chock-full of central bank jawboning came to a laborious close.
Capping a turbulent week for Wall Street that started with riots in Hong Kong and ended with rising tensions in the Middle East, investors ahead of next week’s holiday keep their eyes glued to the Federal Reserve’s policy meeting, concluding on Wednesday, for any clue as to its plans for cutting interest rates in 2020.
Market sentiment has moved to price in (too) few rate cuts from the Fed this year, now just two versus three before the latest solid readings on inflation.
The broadest measure of world equity prices, the MSCI world equity index, held steady close to all-time highs. And on Wall Street, the major indexes turned higher, with the Dow Jones, S&P 500 and Nasdaq Composite all up.
Meanwhile, the 10-year U.S. Treasury yield saw a slight decrease.
In Japan, the BOJ’s policy shift from an expansionary mode to an exit from extreme monetary easing when it signaled the end of bond yield curve control and narrowed its band could be considered a distinct action.
After some initial swings, however, Japan’s Nikkei index closed up, as did the major European markets, bolstered somewhat by the yen’s fall.
The dollar gained against the yen, reflecting market anticipation of the BOJ’s adjustments.
While the Bank of Japan took the small step of starting to raise rates for the first time in nearly two decades, its fragile recovery means it will move slowly on future increases, leaving the yen rather anemic.
The BOJ’s governor Kazuo Ueda, addressing markets on Thursday, indicated that financial conditions would remain accommodative, and the bank would wait to gauge how the economy and inflation responded to its pause.
In Europe, stock and bond markets showed little change.
It could be argued that, with the BOJ formally ending negative interest rates and establishing a guidance range of 0-0.1% target, and, with it, moving to a 0.1% interest on central bank deposits, there has been an end to many years of gradual stimulus.
Other recent developments at the central banks: the Reserve Bank of Australia has held its interest rates, leading to a touching down of the Australian dollar.
The conclusion of the Fed’s meeting, as well as ones at the Bank of England, Norges Bank in Norway and the Swiss National Bank, are all closely watched, with all expected to keep rates unchanged – but they could surprise us.
Market attention is on an update of the Fed’s economic and interest rate forecasts and commentary from chair Jerome Powell (post-Fed) who is likely to be more optimistic with regard to the economic outlook than Powell’s previous state-of-the-union speeches.
This follows a run of better data and a hawkish turn in the rhetoric after last week’s July inflation update. The overwhelming likelihood is that there will once again be a heavy conveyor belt of dovish rhetoric and a diminishing market optionality/FOMO (fear of missing out).
Perhaps, this will pave the way for the US yield curve to steepen further between now and the end of August, but insofar as there’s potential for a high ‘riskiness’ volatility spike in the future.
The sensible risk-reward profile for a bond equity long bias, with an acknowledgment that the trade with real yields would be a safer hedge against a risk-off correction in equities and the biggest risk on offer.
In commodity markets, gold prices fell slightly, while oil prices experienced an increase.
Prices slumped last night as worries grew about China’s efforts to control a currency bubble, but prices recovered this afternoon.
