That’s why gold will keep rising to new levels

News reports revealed expectations that gold will continue to rise after its prices reached record levels. Prices of the yellow metal reached a new all-time high on Thursday, and there is still room to rise as many countries go on a buying spree. Prices may rise in the second half of 2024, especially against the backdrop of expectations of a change in interest rates in the United States.

safe haven:

Strong physical demand for gold also supports its appeal as a safe-haven asset and investors looking to diversify amid lackluster performance in other asset classes. Observers, according to CNBC, indicate that there is room for it to rise further as central banks continue to buy bullion in record quantities.

For his part, Akash Doshi, head of North American commodities research at Citi, told CNBC that prices may rise to $2,300 an ounce in the second half of 2024, especially against the backdrop of expectations that the US Federal Reserve may reduce oil prices. Interest in the second half of 2024.

Gold is currently trading at $2,203. Gold prices tend to share an inverse relationship with interest rates. As interest rates fall, gold becomes more attractive compared to fixed-income assets such as bonds, which would generate weaker returns in a low interest rate environment.

Macquarie also expects gold prices to hit new highs in the second half of the year. Although acknowledging that physical purchases of gold have driven up prices, strategists at Macquarie attributed the recent $100 rise in prices to “large futures purchases” in their March 7 note.

“Central banks, which have bought historic levels of gold over the past two years, will remain strong buyers in 2024 as well,” said Shokai, global head of central banking at the World Gold Council.

Market observers told CNBC that these purchases boosted gold prices despite the rise in interest rates and the strength of the dollar. Higher interest rates tend to make gold less attractive compared to bonds because it pays no interest, while a stronger dollar erodes the luster of gold bullion priced in US currency for holders of other currencies. Gold’s strong physical demand is also fueled by its appeal as a safe-haven asset amid geopolitical uncertainty. “In the past decade, Russia and China have been the largest buyers. However, central bank purchases have diversified in recent years.

China’s largest buyer:

According to the report, China is the main driver of both consumer demand and central bank gold purchases, and is unlikely to slow down. Among central banks, the People’s Bank of China was the largest buyer of gold in 2023.

The report pointed out that China’s weak economy and faltering real estate sector also pushed more investors towards safe assets, with individual investment in gold remaining strong.

While the Polish Central Bank was the second-largest net consumer of gold, acquiring 130 tons of bullion in 2023. Randy Smallwood, CEO of Wheaton Precious Metals, said that the challenges of the war between Russia and Ukraine “in the immediate neighbourhood” are what drives Poland’s desire to… stability.

In 2021, Polish Central Bank Governor Adam Glabinski announced plans to buy 100 tons of gold in an attempt to strengthen the country’s financial security, according to local media reports.

Singapore recorded the third highest net purchases of gold in 2023, driven by purchases by the Monetary Authority of Singapore, which purchased 76.51 tons.

While the Monetary Authority of Singapore did not reveal the reason for the investment decision, central banks were in any case wary of the geopolitical risks resulting from the ongoing conflict between Russia and Ukraine.

“They may have adjusted their reserve allocations according to their risk views,” he said.

Retail Purchases:

According to the report, the rise in gold prices was also driven by retail purchases of jewelry, bullion and coins. On top of the People’s Bank of China purchasing the most gold among the world’s central banks, the country also recorded the largest amount of retail gold purchases.

“At the individual consumer level, China was a major factor in the strong demand for gold last year as individuals turned to gold to diversify from other asset classes,” Fan said.

According to World Gold Council data, China has overtaken India to become the world’s largest buyer of gold jewelry in 2023. Chinese consumers bought 603 tons of gold jewelry last year, an increase of 10% from 2022.

Smallwood said that along with China, consumer demand for gold in India is also one of the largest in the world, especially during India’s wedding season, which typically lasts from October to December, and between January and March. Pointing out that gold is always the highest form of valuable gift that you can give to someone within India.