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23 February 2024
In this week's market update:
In the news this week
Precious metal prices are essentially unchanged over the past month, with gold trading just above USD $2,000 and just below AUD $3,000oz. Silver is also flat, trading just below USD $23oz and AUD $35oz.
While the market is flat over the past month as a whole, short-term volatility has been evident, with gold climbing above USD $2,050oz by late January, then falling below USD $2,000oz by mid-February, before recovering from those intra-month lows in recent days.
Gold, and the precious metal sector more generally is being buffeted by a range of factors including:
That said, the fact the precious metal market is holding its ground in the face of such a melt up in broader risk assets, as well as a rebound in bond yields, is an encouraging sign, and speaks to an ongoing underlying strength in the market.
In due course, some of these currently unfavourable market dynamics will inevitably turn in favour of the precious metals complex.
We explore the potential for this below in our chart of the week section.
Chart of the week – Bubble Warning Signs for Stocks
Anyone with an interest in broader financial markets will know that the most high-profile stock on the market today is chip maker Nvidia. A market leader in the production of high-end graphics processing units (GPU), Nvidia is the poster child of the AI boom, with the stock up a staggering 231% over the past year.
That includes a 16% rally in the last 24 hours, with the share price closing at USD $785.38, given the company a market capitalisation of USD $1.94 trillion, or roughly AUD $3 trillion.
For reference, NVIDIA’s market capitalisation makes this one company more valuable (at current prices) than the entire Australian stock market, based on data from Statista, and larger than the APRA regulated superannuation market.
The boom in Nvidia has some market watchers warning of a bubble in this stock, and the broader markets, with parallels being drawn between Nvidia, and Cisco, the market darling of the technology sector as we NASDAQ bubble peaked back in 200. Charts like the one below, which was published in the Financial Times this week give credence to this argument, with an eery similarity in the rally between these two stocks.
We offer no particular insight into NVIDIAs future prospects. It is clearly an exceptional business with a huge moat in a fast growing and important part of the market. One can understand why many analysts and investors expect its revenues will continue to grow at breakneck speeds.
All we would note is that the same thing could have been said about CISCO just over 20 years ago. Indeed, it was said, as per this Barry Ritholtz article which covers an early 2000 story about CISCO in Fortune Magazine.
It was a great company. By all reports it still is. That didn’t stop the stock price sinking like a stone, as the market wore off all its irrational exuberance, with CISCO falling by almost 90% from peak to trough between March 2000 and October 2002.
That period also coincided with the beginning the secular bull market in gold and precious metals more generally.
It wouldn’t shock to see similar events transpire again in the period ahead.
Inside the office
Trade volumes at ABC Bullion have remained at healthy levels across February, with both new and existing precious metal investors adding gold and silver to their portfolios. Buybacks of precious metals were near record levels in early February, with select investors taking advantage of the spike in the AUD gold price toward 3,150oz to lock in profits.
For those buying precious metal buyers, Lunar products in particularly were strong sellers in recent weeks, with ABC Bullion effectively selling out of most of its Lunar range. Meanwhile, larger investors continue to gravitate towards pool allocated and cast bar investments, due to their exceptional liquidity and low premiums.
We expect this trend to continue for much of 2024, especially if a slowdown in the economy, weakness in the AUD or a pullback in the stock market encourage HNW and SMSF trustees to bolster their portfolios with a precious metal allocation.
Finally, we continue to see strong demand for ABC minted tablets, silver coins and 1oz ABC Bullion gold bars in store, while business wide, we’ve seen a notable uptick in demand for both 37.5 gram ABC Bullion Gold Luong and 37.5 gram ABC Bullion Gold Tael products, with this uptick being driven both from direct clients as well as wholesalers that stock these items.
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Jordan Eliseo
General Manager
ABC Bullion Australia
Disclaimer: This document has been prepared by Australian Bullion Company (NSW) Pty Limited (ABN 82 002 858 602) (ABC). The information contained in this document or internet related link (collectively, Document) is of a general nature and is provided for information purposes only. It is not intended to constitute advice, nor to influence any person in making a decision in relation to any precious metal or related product. To the extent that any advice is provided in this Document, it is general advice only and has been prepared without taking into account your objectives, financial situation or needs (your Personal Circumstances). Before acting on any such general advice, we recommend that you obtain professional advice and consider the appropriateness of the advice having regard to your Personal Circumstances. If the advice relates to the acquisition, or possible acquisition of any precious metal or related product, you should obtain independent professional advice before making any decision about whether to acquire it. Although the information and opinions contained in this document are based on sources, we believe to be reliable, to the extent permitted by law, ABC and its associated entities do not warrant, represent or guarantee, expressly or impliedly, that the information contained in this document is accurate, complete, reliable or current. The information is subject to change without notice, and we are under no obligation to update it. Past performance is not a reliable indicator of future performance. If you intend to rely on the information, you should independently verify and assess the accuracy and completeness and obtain professional advice regarding its suitability for your Personal Circumstances. To the extent possible, ABC, its associated entities, and any of its or their officers, employees and agents accepts no liability for any loss or damage relating to any use or reliance on the information in this document. It is intended for the use of ABC clients and may not be distributed or reproduced without consent. © Australian Bullion Company (NSW) Pty Limited 2020.
- Precious metal prices have steadied across February, with gold largely flat for the month to data after recovering from a brief decline below USD $2,000 per troy ounce (oz) in mid-February.
- Silver is also flat, trading at USD $22.70oz, with the gold to silver ratio stable at 89.
- Currency markets have also been largely flat, with the Australian dollar climbing 1% to USD 0.656 in the past week, while the US Dollar Index is trading just below 104.
- Equity markets have moved higher in the last month, with the S&P 500 +4% and now above 5,000 points. The ASX 200, while lagging its US counterpart, has also rallied, with the ASX now above 7,500 points.
- Bitcoin has also rallied strongly, and is now trading above $50,000 per coin, having rallied by 30% in the last month alone.
- Bond yields have climbed over the past month in the United States, with US 10-year government bonds now yielding 4.32%, as investors push back expectations of monetary easing by the US Federal Reserve.
In the news this week
Precious metal prices are essentially unchanged over the past month, with gold trading just above USD $2,000 and just below AUD $3,000oz. Silver is also flat, trading just below USD $23oz and AUD $35oz.
While the market is flat over the past month as a whole, short-term volatility has been evident, with gold climbing above USD $2,050oz by late January, then falling below USD $2,000oz by mid-February, before recovering from those intra-month lows in recent days.
Gold, and the precious metal sector more generally is being buffeted by a range of factors including:
- Continued weakness in the ETF space, with investors continuing to shed holdings in January. Last month saw almost USD $3bn in outflows, with just over 50 tonnes of metal removed from these products.
- An abandonment of speculative interest in the gold futures market, with managed money long positioning having fallen by 35% since early January, while short positioning (those betting the gold price will fall), increasing by 44% in the week between 6th February to 13th February.
- A market reassessment on the likely trajectory for interest rates in the United States in 2024. A few weeks ago, the expectation was that rates would be cut in Q1 of this year. There are now question marks as to whether rates will be cut at all this year.
That said, the fact the precious metal market is holding its ground in the face of such a melt up in broader risk assets, as well as a rebound in bond yields, is an encouraging sign, and speaks to an ongoing underlying strength in the market.
In due course, some of these currently unfavourable market dynamics will inevitably turn in favour of the precious metals complex.
We explore the potential for this below in our chart of the week section.
Chart of the week – Bubble Warning Signs for Stocks
Anyone with an interest in broader financial markets will know that the most high-profile stock on the market today is chip maker Nvidia. A market leader in the production of high-end graphics processing units (GPU), Nvidia is the poster child of the AI boom, with the stock up a staggering 231% over the past year.
That includes a 16% rally in the last 24 hours, with the share price closing at USD $785.38, given the company a market capitalisation of USD $1.94 trillion, or roughly AUD $3 trillion.
For reference, NVIDIA’s market capitalisation makes this one company more valuable (at current prices) than the entire Australian stock market, based on data from Statista, and larger than the APRA regulated superannuation market.
The boom in Nvidia has some market watchers warning of a bubble in this stock, and the broader markets, with parallels being drawn between Nvidia, and Cisco, the market darling of the technology sector as we NASDAQ bubble peaked back in 200. Charts like the one below, which was published in the Financial Times this week give credence to this argument, with an eery similarity in the rally between these two stocks.
We offer no particular insight into NVIDIAs future prospects. It is clearly an exceptional business with a huge moat in a fast growing and important part of the market. One can understand why many analysts and investors expect its revenues will continue to grow at breakneck speeds.
All we would note is that the same thing could have been said about CISCO just over 20 years ago. Indeed, it was said, as per this Barry Ritholtz article which covers an early 2000 story about CISCO in Fortune Magazine.
It was a great company. By all reports it still is. That didn’t stop the stock price sinking like a stone, as the market wore off all its irrational exuberance, with CISCO falling by almost 90% from peak to trough between March 2000 and October 2002.
That period also coincided with the beginning the secular bull market in gold and precious metals more generally.
It wouldn’t shock to see similar events transpire again in the period ahead.
Inside the office
Trade volumes at ABC Bullion have remained at healthy levels across February, with both new and existing precious metal investors adding gold and silver to their portfolios. Buybacks of precious metals were near record levels in early February, with select investors taking advantage of the spike in the AUD gold price toward 3,150oz to lock in profits.
For those buying precious metal buyers, Lunar products in particularly were strong sellers in recent weeks, with ABC Bullion effectively selling out of most of its Lunar range. Meanwhile, larger investors continue to gravitate towards pool allocated and cast bar investments, due to their exceptional liquidity and low premiums.
We expect this trend to continue for much of 2024, especially if a slowdown in the economy, weakness in the AUD or a pullback in the stock market encourage HNW and SMSF trustees to bolster their portfolios with a precious metal allocation.
Finally, we continue to see strong demand for ABC minted tablets, silver coins and 1oz ABC Bullion gold bars in store, while business wide, we’ve seen a notable uptick in demand for both 37.5 gram ABC Bullion Gold Luong and 37.5 gram ABC Bullion Gold Tael products, with this uptick being driven both from direct clients as well as wholesalers that stock these items.
Jordan Eliseo
General Manager
ABC Bullion Australia
Disclaimer: This document has been prepared by Australian Bullion Company (NSW) Pty Limited (ABN 82 002 858 602) (ABC). The information contained in this document or internet related link (collectively, Document) is of a general nature and is provided for information purposes only. It is not intended to constitute advice, nor to influence any person in making a decision in relation to any precious metal or related product. To the extent that any advice is provided in this Document, it is general advice only and has been prepared without taking into account your objectives, financial situation or needs (your Personal Circumstances). Before acting on any such general advice, we recommend that you obtain professional advice and consider the appropriateness of the advice having regard to your Personal Circumstances. If the advice relates to the acquisition, or possible acquisition of any precious metal or related product, you should obtain independent professional advice before making any decision about whether to acquire it. Although the information and opinions contained in this document are based on sources, we believe to be reliable, to the extent permitted by law, ABC and its associated entities do not warrant, represent or guarantee, expressly or impliedly, that the information contained in this document is accurate, complete, reliable or current. The information is subject to change without notice, and we are under no obligation to update it. Past performance is not a reliable indicator of future performance. If you intend to rely on the information, you should independently verify and assess the accuracy and completeness and obtain professional advice regarding its suitability for your Personal Circumstances. To the extent possible, ABC, its associated entities, and any of its or their officers, employees and agents accepts no liability for any loss or damage relating to any use or reliance on the information in this document. It is intended for the use of ABC clients and may not be distributed or reproduced without consent. © Australian Bullion Company (NSW) Pty Limited 2020.
