• Related Products WisdomTree Core Physical Gold, WisdomTree Physical Silver Find out more

Gold bullion reached a new high of US$2195/oz on 8 March 2024¹. The recent rally seems to have been driven by a sharp rise in speculative long positioning in gold futures markets. Data released on Friday 8 March 2024 (relating to Tuesday 5 March 2024) showed that speculative longs rose by 62,528 contracts (Figure 1), the highest weekly gain since February 2020. Meanwhile shorts remained broadly flat. Although, in absolute terms, the longs are still lower than they were back in January 2024, it is clear that there has been a notable reversal in institutional investors’ sentiment towards gold, at least in the futures market.

Gold outperforms TIPS again

Gold has historically moved in tandem with real rates (inversely), but that relationship has weakened in recent years. The most recent spike in gold has driven a deeper wedge between Treasury Inflation Protected Securities (TIPS) and gold (Figure 2). This underscores why analysing gold prices can not be done in a univariate fashion and our model approach to prices (using many different drivers – including treasury yields, inflation, speculative positioning and the US Dollar) best captures gold’s price behaviour².

Gold bullion outperforms gold miners

Gold bullion has also risen much more than gold miner equity prices (see Figure 3). Gold miners carry an equity market and a gold price beta. Global equity markets have been performing extremely well, with the MSCI World Net TR up 7.7% year-to-date and S&P 500 TR up 8.3% year-to-date, both greater than gold’s 5.0% rise over the same period³. However, the rise in equity markets has been somewhat narrow, with just a handful of stocks driving most of the performance. Gold miners unfortunately were not part of that club of outperformers.

Gold outperforms silver, but expect a catch-up

Gold has also outperformed silver and the gold to silver ratio is now more than 1.5 standard deviations about the average since 1990 (Figure 4). Silver is often thought of as a leveraged play on gold as the metal usually moves in a similar direction to gold, although often with a higher beta. We expect both gold and silver to end the year higher: gold at $2,210/oz⁴ and Silver at $26.01/oz⁵. We therefore believe that silver has more catch-up potential and the gold-silver ratio could moderate to 84 from closer to 90 at present.

Conclusion

Gold’s recent rally has been impressive and indicates an improved sentiment towards the metal. A natural question on investors’ minds, is what assets will rise on gold’s coattails? We believe silver has plenty of catch-up potential.

WisdomTree solutions

WisdomTree is a leading provider of physically-backed precious metal exchange-traded commodities (ETCs). Since creating Europe’s first physical gold ETC almost two decades ago, we have continued to build our suite of precious metal products, offering clients best in-class features and price competitive solutions. WisdomTree Core Physical Gold (WGLD), for example, was launched in December 2020 with the highest responsible gold standards applied and custodians were asked to act on a best-efforts basis to only allocate 2019 or later London Bullion Market Association (LBMA) gold bars. It also has a management fee of only 12 basis points.

WisdomTree Physical Silver (PHAG), has seen increased client interest recently, with flows of over US$500 million in March 2024 alone⁶. It is by far the largest European silver ETC, eclipsing the second largest (Swiss based ZKB Silver ETF) by $516 million⁷. With the liquidity of ETCs being driven by the liquidity of the underlying (i.e., silver bullion), recent trades corroborate that WisdomTree Physical Silver is capable of accommodating large inflows over a short period of time without materially affecting price.

Sources

¹ Source: Bloomberg

² Source: Gold: how we value the precious metal

³ Source: Bloomberg

⁴ Source: Gold Outlook to Q4 2024: From one high to the next

⁵ Source: Silver Outlook to Q1 2024: Two-faced silver

⁶ Source: https://ir.wisdomtree.com/

⁷ Source: Bloomberg, 12/3/2024