Agio Gold Sector Fund Ltd. Market Update: September 2023

Monetary Policy

On the eve of the 1990, 2001 and 2007 recessions, many economists asserted that the US was on the cusp of achieving a soft landing, where rising interest rates limited inflation without causing a recession. The Fed held off from additional rate hikes this month while signaling there may be room for another hike this year depending on how the economy evolves and its assessment of the effects of tightening in financial conditions that have already occurred. History shows that to the contrary soft landings are rare. Since World War II the US has achieved only one durable soft landing in 1995. Investors need to be prepared for more risk asset volatility.

Macro Economy

With the major central banks administering tighter monetary policy the macroeconomy effects have been uneven but consistent in trend with lower trade volumes. China’s Communist Party is under increasing pressure on two fronts: 1) an increasing number of jobless well-trained youth who remain unemployed and 2) an imploding residential real estate market. In an effort to prevent further spiraling of the real estate market and stimulate an economy that has never fully recovered from strenuous covid lockdowns China has begun lowering interest rates. Being the largest single contributor in the global supply chain, the continued weakness in the Chinese economy and Chinese exports may be an indicator of the impending monetary strain which may become more widespread throughout the entire global economy.

Markets

Risk assets have entered a natural corrective phase since mid-August: to be updated S&P 500                                                 +11% NASDAQ                                               +33% Dow                                                             +1% Bitcoin                                                    +60% Commodities (CRB)                          +2% Gold                                                           +3%

Gold Sector and Tactical Trades

Gold has shown minor weakness in contrast to the rising nominal rate environment, staying range bound between the $1,800/oz and 2,000/oz level and inline with spot movements seen throughout the year. We continue to find US treasuries attractive at this time and will continue to roll- month by month until Gold and Gold Equities approach a more attractive support level as indicated by our models. The October November window could be a launch point for that shift according to seasonal trends.