Gold Price 2023 Year-End Review

Gold price in Q1

2023 was a less volatile year for gold than 2022, but the yellow metal still experienced some drastic price changes, especially during the first half of the year. Gold started the period at US$1,839 and quickly trended upward, buoyed by a weak US dollar and a 37 basis point drop in the US 10 year Treasury yield. The metal found additional support through central bank purchases, and by the end of January had reached the US$1,950.17 mark.

Gains made through the first month didn’t hold through February, however. The gold price plunged on the US Federal Reserve’s 0.25 percent rate hike on February 1, and continued to retreat as the US economy, the dollar and Treasury yields all saw gains. The precious metal ultimately fell to a year-to-date low of US$1,809.87 on February 23.

A reversal came in early March as a banking crisis hit the US, beginning with the collapse of Silicon Valley Bank (SVB). Much of SVB’s money was in Treasury bonds, which become riskier when interest rates are high — SVB didn’t have the cash on hand to cover increasing cash withdrawals from struggling tech industry clients.

As a result, it announced on March 8 that it had sold off some of its securities portfolio at a loss of US$1.8 billion. The move sent its share price plummeting, and federal regulators stepped in as clients clamored to withdraw their cash.

That same day, Silvergate Bank in California announced it was winding down operations and liquidating assets. This event was followed shortly after with the March 12 news that Signature Bank in New York City was also being shuttered. The two banks had become critical financial institutions for cryptocurrency companies, with failed crypto exchange FTX being a major client of Silvergate.

Those collapses sent shockwaves through the global financial system, and contributed to the mid-March collapse of Credit Suisse, Switzerland’s second-largest bank. It had been plagued by years of mismanagement and scandal.

The banking crisis helped the gold price jump from US$1,814.04 on March 5 to US$1,989.13 by March 15. The quarter closed out with the second of the Fed’s 2023 rate hikes on March 22. The central bank tacked on another 0.25 percent to raise rates to 5 to 5.25 percent.

Gold price in Q2

The second quarter was characterized by a continued lack of confidence in the global banking system, and these concerns allowed gold to break above US$2,000 on April 3. Ongoing investor fears drove the price of gold to a near-record high of US$2,049.92 on May 3. However, the Fed announced its third rate hike of the year that day, increasing rates to 5.25 to 5.5 percent and keeping the yellow metal's gains in check.

With interest rates at a 22 year high and confidence returning to the banking sector, investor sentiment for gold waned in late May and into June as interest-bearing assets gained traction.

Gold price in Q3

The third quarter was the quietest part of the year for gold, although major global indexes like the Dow Jones Industrial Average (INDEXDJX:.DJI), the S&P 500 (INDEXSP:.INX), the S&P/TSX Composite Index (INDEXTSI:OSPTX) and the Nikkei 225 (INDEXNIKKEI:NI225) hit year-to-date or near year-to-date highs in the first half of the quarter.

The July through September period saw the gold price trend downward, but the biggest losses came at the end of the quarter. On September 20, the Fed announced it would hold interest rates at 5.25 to 5.5 percent. Five days later, the price of gold began to plunge, first dropping below US$1,900 and then falling further to end the period at US$1,848.63.

Gold price in Q4

With gold falling to a year-to-date low of US$1,820.01 on October 4, the precious metal appeared to be on track to drop below the US$1,800 mark in the fourth quarter. However, the October 7 attacks by Hamas on Israel started a new round of violence in the Middle East, sparking concerns about neighboring Arab states being drawn into the conflict.

As the war continued, gold made gains throughout October, closing at US$2,007.08 on October 27; it fluctuated between US$1,930 and US$2,000 through the end of November. Gold's momentum continued on the back of Israel-Hamas worries and other factors, reaching record high of US$2,152.30 during intraday trading on December 3.

The end of the year also saw investors watching for the Fed’s next move. The consensus is that the central bank is done with hikes and won't make another move until it begins to lower rates in mid-2024. However, the Fed is keeping an eye on the economy and has suggested rate hikes aren’t off the table as it tries to meet its 2 percent inflation target.

Gold supply and demand in 2023

While supply and demand dynamics aren't usually a primary factor when it comes to the gold price, strong central bank buying has helped keep the yellow metal elevated in the face of high interest rates.

After setting a record in 2022 with purchases of 1,136 metric tons, central bank demand is on track to set a fresh record in 2023 — in total, 800 metric tons had been bought through to the end of Q3.

Gold M&A activity in 2023

2023 is predicted to bring the highest level of gold sector M&A in a decade. From a jaw-dropping merger to a staggering initial public offering (IPO), here are some highlights that made the headlines.

Pan American and Agnico Eagle acquire Yamana

On March 31, Pan American Silver (TSX:PAAS,OTC Pink:PAASF) and Agnico Eagle Mines (TSX:AEM,NYSE:AEM) finalized their acquisition of Yamana Gold. Under the terms of the deal, Pan American assumed control of Yamana’s Latin American assets, adding to its portfolio the Jacobina mining complex in Brazil, the El Peñón and Minera Florida mines in Chile and the Cerro Moro mine and MARA development project in Argentina.

Yamana’s Canadian assets were transferred to Agnico Eagle, consolidating its ownership of both the Canadian Malartic mine and the Wasamac project in Quebec, Canada, along with several exploration properties in Ontario and Manitoba.

B2Gold buys Sabina Gold and Silver

April 19 saw B2Gold (TSX:BTO,NYSEAMERICAN:BTG) complete its US$832 million acquisition of Sabina Gold and Silver. The arrangement gave B2Gold access to Sabina's Back River Gold District in Nunavut, Canada, which consists of five mineral claims along an 80 kilometer belt, including the fully permitted Goose project.

Huge gold IPO in Indonesia

July 7 brought Indonesia’s biggest IPO this year and one of the world’s best-performing IPOs in 2023: PT Amman Mineral Internasional (IDX:AMMN). The company raised the equivalent of over US$713 million in its debut, and shares have since surged 250 percent in value, giving the firm a market cap of US$30 billion as of December 11.

Newmont takes over Newcrest in the biggest deal of the year

The biggest deal of the year was the merger of gold-mining titans Newmont (TSX:NGT,NYSE:NEM) and Newcrest. It was percolating in the minds of investors since it was first announced on February 5, but wasn’t finalized until November 6 after shareholders from both companies overwhelmingly voted in favor of the deal.

Calibre Mining proposes merger with Marathon

On November 13, Calibre Mining (TSX:CXB,OTCQX:CXBMF) entered into an agreement to acquire Marathon Gold (TSX:MOZ,OTCQX:MGDPF). If the deal is approved, the companies will combine to form a mid-tier gold producer focused on operations in the Americas with average annual gold production of about 500,000 ounces.

Investor takeaway

Banking and geopolitical instability worked against high interest rates and bond yields to keep the gold price elevated through much of 2023, even allowing the yellow metal to make a fresh all-time high.

With war still simmering between Russia and Ukraine, and tensions at a boiling point in the Middle East, gold may be able to maintain its momentum in 2024, perhaps spurring investor interest in equities.

“There are a lot of fantastic companies out there that have really good resources that are selling for a quarter to a fifth of what they would be selling for in, not a euphoric market, but a normalized market,” Brien Lundin, editor of Gold Newsletter, said at the New Orleans Investment Conference at the beginning of November.

While gold stocks, particularly juniors, will always be a riskier investment than the metal itself, 2024 could present entry points for investors looking for increased profits from companies whose bottom lines have benefited from the high price of gold for the past few years.