Annual demand of gold in 2023 fell by 5 %, compared to that in 2022, to 4, 448 tonnes, excluding over the counter ( OTC ) transactions. According to data from the World Gold Council ( WGC), central banks contributed to 1, 037 tonnes of the gold demand last year, which is the second-highest on record.
In the first fourth of 2024, world gold demand, including OTC, was off 3 % year- on- year to accomplish 1, 238 tonnes, marking the strongest second quarter since 2016. Excluding OTC, first quarter’s demand fell by 5 % to 1, 102 tonnes.
China, India and Singapore were among the Asian markets that added the most to their golden getting during the first quarter, with an increase of 27.06, 18.51 and 6.57 kilograms both. These include both key banks and financial transactions.
The story is also about the skyrocketing metal price, which rose by as much as$ 2,300 per ounce in April and remained at its all-time high despite a minor decline at the beginning of May.
One of the main causes of a rising interest rate in gold is Shaokai Fan, mind of central bankers at WGC, who quoted Shaokai Fan as saying, is because of the confidence in the US Fed’s future rate cuts.
” Gold has reached a new all-time higher thanks to a number of different things. Although interest rate reduction anticipation are most definitely raising interest, he said there is a solid real demand for silver underlying this.
Fan claimed that the central banks that have purchased “historic levels” of silver over the past two centuries have remained significant customers this time. For instance, the curiosity in China is related to the landscape of investors ‘ attempts to expand in response to weak performance in other asset classes.
Retail traders now have greater access to the business. Using distributed ledger technology ( DLT), HSBC in Hong Kong has created the first bank-issued tokenized gold. It is supported by vaults in London that are owned by HSBC.
Flee for surety
At the end of next year, market was first expecting nearly six 25- basis- point cuts within a 12- month timeframe. Christian Scherrmann, US economist at DWS, expects two rate cuts by the US Fed by the end of the year. Curbing inflation in the world’s largest economy has proved to be slower than expected, with the consumer price index ( CPI ) for March seeing a 0.4 % month- over- month core inflation increase.
Lower interest rates generally benefit the gold market because they lower the opportunity cost of holding gold, according to Fan. In a more volatile environment, the team anticipates inflows into gold exchange-traded funds ( ETFs ).
In Q1 2024, the global gold ETF holdings dropped by 114 tonnes, primarily as a result of an outflow from European and North American funds.
Asian gold ETFs, on contrast, witnessed an increase in assets under management by 16 % to$ 11 billion, mainly generated by participants in China, due to a weakening yuan and other domestic assets.
Meanwhile, global geopolitical risks are rising: tensions between China and the US are stillrounding, and global supply chains and general market sentiment are being affected by ongoing conflicts in Ukraine and the Middle East. Gold, as a’ safe have n’, has therefore attracted wide interest.
The People’s Bank of China purchased more gold from the central bank in Asia in 2023, according to Fan. The PBOC currently has 2, 262.45 tonnes of gold reserves, followed by Japan and India, which have each over 800 tonnes.
The PBOC has added gold for the first 18 months in a row, but the price increase has slowed as the price rises have slowed.
The Reserve Bank of India’s ( RBI ) gold reserves, as of March this year, saw a 34 % increase compared to that in March 2019, reaching a total holding of 822 tonnes of gold. In addition, the Monetary Authority of Singapore’s ( MAS ) gold reserves increased by 2 tons in the first quarter.
The shift in geopolitical attitudes following the Russian’s attempted invasion of Ukraine and the subsequent sanctions placed on Russia’s foreign exchange reserves have resulted in a significant increase in central bank gold buying, according to Fan.
” We anticipate that central banks will continue to be gold’s main sources of income this year,” he continued. The US Fed’s rate cuts decisions, however, will still have the biggest immediate impact on the price of gold.
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