- Global uncertainty and expectations for central bank interest rate cuts have pushed gold prices to record highs.
- China’s consumers and central bank are buying up gold even as the yuan’s fall drives up the price of the metal.
- Other central banks around the world are also buying gold to diversify their holdings.
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China’s economy is not in great shape, and its currency is weak. The uproar has caused the price of gold, which is considered a safe-haven asset, to soar.
gold spot price recently hit an all-time high — Over $2,400 per ounce — Thanks to global demand against a backdrop of economic and geopolitical uncertainty.expectations of central bank interest rate cuts Lower interest rates also typically reduce yields on fixed income assets such as bonds, making gold more attractive.
In China, consumers are grappling with an economy struggling to recover after the pandemic and a weakening yuan that has fallen by about 5% against the dollar last year. This makes gold, which, like most internationally traded goods, is traded in US dollars on global markets, even more expensive for Chinese consumers. But consumers and China’s central bank don’t have enough gold available.
China’s Gen Z investors are also jumping on board with the trend, buying up small bottles of “gold beans,” Bloomberg reported. reported last month. They are looking for an alternative to the Chinese stock market, which has slumped in recent years.
China’s central bank is also buying up much more gold than Gen Z’s grams of beans.
The People’s Bank of China (PBOC) has been buying gold for 17 consecutive months. According to a report by the International Trade Association, holdings of precious metals have increased by 16% over this period. World Gold Council. This hoarding is consistent with trends among central banks around the world. Diversify your assets This is to reduce dependence on the US dollar.
According to the World Gold Council, China’s central bank purchased 225 tons of gold in 2023. Last month, China’s gold reserves increased by 5 tonnes, bringing the country’s total holdings to 2,262 tonnes.
China overtakes India to become world’s largest gold buyer
China is now home to a swarm of gold bugs, which has decisively helped the country overtake India as the world’s largest buyer of gold. The two countries have been competing for the top spot for years, but China’s buying spree last year left it behind India.
Last year, China’s demand for gold jewelery increased by 10% to 630 tonnes, while India’s purchases fell by 6% to 562 tonnes, the paper said. World Gold Council. US consumers were a distant third, purchasing just 136 tonnes of gold jewelry in 2023.
It’s not just China. World Gold Council data Indicates other central banks. include Poland and Singapore are also raising gold to hedge against global economic uncertainty.
India’s central bank bought 16.2 tonnes of gold last year. The US did not add gold to its reserves. However, the US already has the world’s largest holdings of gold, with around 8,134 tonnes of the precious metal, far ahead of second-place Germany, which has 3,352 tonnes.
Despite the gold rush, Georgette Boere, an economist at Dutch bank ABN AMRO, warned against going all-in on commodities amid the record highs of the gold rush. Memo for April 15th.
“Gold price trends are positive and there are no limits in sight. However, we remain cautious,” Boere said.
She highlighted the seeming contradictions in the market. Normally, high interest rates in the US suppress gold prices, but the opposite is happening.
“While these changes have occurred in the past, they tend to be temporary in nature and can last anywhere from three to six months,” Boere wrote.
The current high price of gold does not mean there is a shortage of supply, she wrote.
“The amount of central bank purchases does not justify the current level of gold prices,” she wrote. Based on her assessment, she said, she maintains her forecast of $2,000 an ounce of gold at the end of 2024, below the current rate of about $2,400.