According to the data of the Business News Agency, the spot market price of gold on February 2, 2023 was 424.66 yuan/g, up 0.7% per day, up 3.60% from the early average spot market price of 409.89 yuan/g at the beginning of the year (January 1); Compared with the early average spot market price of 389.84 yuan/kg at the beginning of October 2022 (October 1), the increase was 8.93%.
According to the data of Business News Agency, the average price of silver market on February 2, 2023 was 5293.67 yuan/kg, up 2.13% per day, down 0.96 from the average price of spot market at the beginning of the year (January 1) at 5345 yuan/kg; Compared with the early average spot market price of 4368.33 yuan/kg at the beginning of October 2022 (October 1), the increase was 21.18%.
Price trend of precious metals and crude oil
Comparison of precious metal gold and silver price trends in the past year
In 2022, the rise and fall trend of precious metal gold and silver will converge, but in April and August, silver will fall deeper, and the recent recovery will be more obvious. In December, silver will continue the strong market of last month, and gold will start to consolidate at a high level. In 2023, the price of precious metal gold will improve and silver will consolidate at a high level.
Macro fundamentals
The first rate increase by the Federal Reserve in 2023 met expectations
In 2023, the Federal Reserve announced a 25 basis point interest rate increase at its first interest rate meeting, raising the target range of the policy interest rate, the federal funds rate, from 4.25% to 4.50% to 4.50% to 4.75%. At the subsequent press conference, Federal Reserve Chairman Powell said that it would take time to tighten the financial situation after considering raising interest rates for about two more times and then suspending it. Powell remained confident in the soft landing of the US economy and believed that the US Congress would raise the debt ceiling, saying: “This is necessary”.
The first rate increase by the Federal Reserve in 2023 is basically in line with expectations, and the current rate increase by the United States is indeed coming to an end.
2. The European Central Bank has a high probability of following up the interest rate increase
In the UK, in view of the fact that the domestic inflation rate is still at the highest level in the past 40 years, the market expects the Bank of England to continue its most aggressive interest rate increase path in the past 30 years, by 50 basis points. In the euro area, President Lagarde of the European Central Bank recently made it clear that the European Central Bank will continue to raise interest rates and fight against high inflation. It is widely expected that the European Central Bank will cut its balance sheet while raising interest rates by 50 basis points.
Supply and demand fundamentals
According to the data of the World Gold Association, the annual gold demand (excluding OTC trading) in 2022 increased by 18% to 4741 tons year-on-year, which is the highest annual total demand since 2011. In 2022, the global central bank’s annual demand for gold purchase reached 1136 tons, more than double the 450 tons of the previous year and hit a new high in 55 years. In the fourth quarter of 2022 alone, global central banks purchased 417 tons of gold, and the total amount of gold purchased in the second half of the year also exceeded 800 tons.
On the supply side, in 2022, the global total supply of gold continued a mild upward trajectory, with a year-on-year increase of 2% to 4755 tons, which remained above the pre-epidemic level. It is worth noting that the output of gold mine reached a new high in four years, increasing to 3612 tons.
Domestically, according to the latest statistics of the China Gold Association, in 2022, the domestic raw material gold output was 372.048 tons, an increase of 43.065 tons compared with the same period in 2021, with a year-on-year increase of 13.09%, including 295.423 tons of gold minerals and 76.625 tons of non-ferrous by-products. In addition, the gold production of imported raw materials in 2022 will be 125.784 tons, up 9.78% year on year. If this part of the gold production of imported raw materials is added, the country will produce 497.832 tons of gold, up 12.24% year on year. In 2022, the national gold consumption was 1001.74 tons, down 10.63% from the same period in 2021. Among them: 654.32 tons of gold jewelry, down 8.01% year on year; 258.94 tons of gold bars and coins, down 17.23% year on year; Industrial and other gold consumption was 88.48 tons, down 8.55% year on year. The People’s Bank of China continuously increased its gold holdings in November and December, with a total increase of 62.21 tons. By the end of 2022, China’s gold reserves had reached 2010.53 tons.
Precious metal aftermarket
Precious metals are relatively sensitive to macro fundamental factors due to their strong monetary attributes. The Federal Reserve raised interest rates by 25 points for the first time in 2023, basically in line with market expectations. At the same time, the market’s expectation of the gradual end of the current interest rate increase cycle began to be strong. The US dollar index and the US bond interest rate both fell sharply, which also contributed to the short-term rise of precious metals. However, the signal released after the meeting that the interest rate will not be cut this year and the economy will maintain moderate growth will also have some pressure on the continued rise of precious metal prices, including the upward energy. In the short term, it is expected that the price of precious metals will be mainly stable and strong.
