Agio Gold Sector Fund Market Update: October 2023

Stock Markets
The August through October window has historically been a time for seasonal weakness in stock markets across the globe. This year has run true to form on that count as the broader markets have been relatively soft over the last weeks. However, the technical conditions look benign as the season moves into November – the beginning of a four to six-month period of seasonal strength for the major global markets.

Macro Economy
Outside the market there are signs that “Good Things” are happening – continued positive consumer sentiment as US consumers splurge and credit card balances are soaring. As has been noted the COVID lockdown was unprecedented as is the rebound to normal behavior which is reinvigorating the economy. Still the US yield curve remains inverted signaling a high probability of a recession in the not-too-distant future. Additionally, the Producer Price Index has fallen substantially below the zero line which provides further support for a pending recession as has happened numerous times in the database going back to 1914.

Markets ended October with upside momentum after a mid-month corrective phase:

S&P 500                                              -1.16%
NASDAQ.                                           -1.07%
Dow                                                       -0.60%
Bitcoin                                              +28.62%
Commodities (CRB)                     -1.44%
Gold                                                     +6.51%

Gold Sector and Tactical Trades
Gold has shown signs of attempting to break out of its recent range to the upside. The typical mantra dollar down / gold up is no longer relevant. Instead, we look for mining costs to fall relative to the bullion price which will drive earnings up. The Gold/CRB ratio is one proxy that provides a reliable signal and it became overbought along with the stock rally into May. This is when we formed a view that the next risk adjusted low would be found in October and this viewpoint has been proven correct. Gold stocks should now be accumulated gradually on weakness.


⚠ Disclaimer: