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Education Series: Single-Stock ETPs

Gold Not Loosing its Lustre

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Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

The latest Gold Demand Trends report by the World Gold Council shows that gold demand in the third quarter of 2022 reached a high of 1,181 metric tons, a staggering 28% increase compared to the same period the prior year. This robust demand pushed the year-to-date total back to pre-COVID levels, with both consumers and central banks driving this growth.

Central banks have been accumulating gold at an unprecedented rate not seen in 55 years. Analysts estimate that in Q3 2022, almost 400 metric tons of gold were purchased. Late last year substantial quantities of gold were bought by the central bank of China, but also the central banks of Turkey, India, Uzbekistan, Egypt, Qatar, and Iraq made notable purchases.

The findings of a recent survey of central banks, shows that 25% of respondents indicated their intention to increase their gold reserves in the coming 12 months.

However, despite this impressive overall demand, investment in gold was down 47% YoY as ETF investors withdrew 227 metric tons due to a challenging market environment of rising interest rates and a strong US dollar.

But this drop in investment demand did not deter retail investors from turning to gold as a safe haven amidst rampant inflation and geopolitical uncertainty. In fact, retail demand for gold in Q3 2022 soared 36% YoY, as investors sought to hedge against inflation by buying bars and coins, highlighting gold’s continued popularity as a store of value.

Jewellery consumption rebounded and reached pre-pandemic levels, with India seeing the highest demand with urban consumers driving the growth. Similarly, the Middle East also recorded impressive growth with Saudi Arabia and the United Arab Emirates leading the scorecard.

In light of these findings, it’s clear that gold continues to be a trusted and valuable asset for investors, even in uncertain times. Despite the headwinds faced throughout 2022, the enduring demand for gold showcases its resilience and its ability to weather market volatility.

Despite a volatile macroeconomic climate in 2022, gold’s status as a safe-haven asset was evidenced by its outperformance of most asset classes. Looking ahead into 2023, it is expected that central banks purchases and retail investment will remain robust.

Source: Tradingeconomics

Gold is up almost 17% from its November 2022 low and is currently flirting with its resistance of $1,878. The leading RSI indicator is constructive, and we see a good probability of that level being cleared subsequently. While a short-term pull back to unwind the overbought momentum conditions could be seen in the short-term, levels to $1,920 – $1,940 appear achievable in the coming months.

The December 2022 Nonfarm Payroll report revealed that the labor market remains resilient despite the Fed’s efforts to curb inflation, leading to a decline in the U.S. dollar boosting the price for gold. The latest rally in gold has also benefited from China’s reopening with investors’ attention now shifting to Thursday’s highly anticipated U.S. Consumer Price Index inflation report.

Gold’s upward momentum is expected to persist as investors anticipate further U.S. dollar declines in the coming year. The U.S. dollar has clearly peaked in September 2022, and its current downward trajectory is expected to continue. In addition to the safe-haven demand stimulated by inflation and financial market volatility, gold prices are being supported by central banks’ buying at a rate not seen since 1976, according to the World Economic Forum.

With over a third of the global economies projected to enter recession and uncertainty surrounding central banks’ monetary policy in the face of persistent inflation, financial markets are likely to face another tumultuous year. Now, more than ever, investors are turning to gold as a safe-haven asset to navigate the stormy waters of the global economy.

Active traders looking for magnified exposure to the precious metal could consider our 3x Long Gold and -3x Short Gold ETPs.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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Sandeep Rao

Research

Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.

Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.

Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.

Violeta Todorova

Senior Research

Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.

Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.

Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.

Julian Manoilov

Senior Analyst

Julian joined Leverage Shares in 2018 as part of the company’s premier expansion in Eastern Europe. He is responsible for web content and raising brand awareness.

Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.

For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.

Oktay Kavrak

Director

Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.

He joined LS from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.

Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.

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