'Sharks' continue to buy gold, gold prices remain high

Gold rush

Gold fever has exploded globally in recent years, with central banks (CBs) buying the metal, representing the demand of the wealthy.

In 2022, gold demand surged to its highest level in more than a decade thanks to intense buying by central banks around the world.

Central bank gold demand to fall slightly in Q2 2023 but remain “very positive” Global gold demand (excluding OTC, non-exchange transactions) in Q2 2023 fell 2% year-on-year to 921 tonnes, as central banks slowed purchases and consumption, according to the World Gold Council (WGC).

However, demand from gold jewelry and investors remains stable during the period of global instability, thereby helping to maintain high gold prices in the second quarter of 2023.

According to the WGC, in the first half of 2023, central banks continued to buy 387 tons of gold, a record high compared to the same period of all years since 2000. Gold consumption by this group decreased in the past 3 months, but remained at a high level.

It is also worth noting that jewelry gold consumption in the second quarter still increased despite the high gold prices during this period. According to the WGC, jewelry gold consumption reached 476 tons in the second quarter, up 3% compared to the same period even though China's gold consumption was lower than the market's expectations.

China’s economic recovery is quite slow. The country’s real estate market does not have strong enough policies to recover, thereby negatively affecting overall growth.

*Central banks of many countries continue to buy gold. (Photo: KC)*

Another gold shark is Türkiye. In the second quarter, the country had to sell gold but still bought a net 103 tons.

According to WGC, if including transactions on the OTC free market (not through the gold exchange), total gold consumption in the second quarter of 2023 increased by 7% to 1,255 tons.

Gold production is estimated to hit a new record of 1,781 tonnes in the first half of 2023.

Total gold consumption was also dragged down partly by low demand for its technology uses as consumer electronics continued to weaken.

Gold trend unclear

According to some recent reports, the net buying trend of central banks is likely to continue to increase in the context of high geopolitical risks and high inflation, some economic recovery.

The US economy is expected to have a soft landing. The US Federal Reserve (Fed) can avoid the scenario of pushing the US into recession, when inflation slows and growth is strong despite the Fed raising interest rates 11 times. According to Goldman Sachs, the probability of a US recession has decreased to 20%.

According to experts, it is likely that the Fed will continue to raise interest rates once again and may keep them high for a long time to reduce inflation. If so, the USD will increase in the short and medium term, thereby negatively affecting gold prices.

In the first trading session of August 1, spot gold prices fell sharply, losing nearly 20 USD to 1,948 USD/ounce due to the increase in the USD price.

On the other hand, the economies of Europe and China also showed positive signs. This slowed down the increase of the USD.

The latest figures raise the possibility that Europe may be heading out of recession, although economic activity in the region has yet to pick up enough to spur growth. Official data showed that French GDP grew 0.5% in the second quarter from the previous quarter, thanks to strong foreign trade. Spain reported GDP growth of 0.4%. Germany's economy is flat.

Meanwhile, China’s gold demand is expected to rise in the second half of this year thanks to stimulus policies aimed at boosting consumption and investor demand for safe-haven assets, which is also the traditional peak season for gold jewelry consumption related to the holiday season.

Beijing is rolling out measures to revive the property market and spur economic growth. A recovery in the world’s second-largest economy will boost the value of the yuan, putting pressure on the dollar.

The greenback is also suffering from a long-term bearish reversal after an unprecedented cycle of 11 rate hikes totaling 525 basis points.

Gold price today August 2: Gold falls rapidly from 2-month peak Gold price today August 2 on the international market fell rapidly from 2-month peak due to increased profit-taking pressure and the USD appreciation.

Source