Page 36 - Bullion World Volume 03 Issue 6 June 2023

Bullion World | Volume 3 | Issue 6 | June 2023

Bullion World is delighted to have Risk and uncertainty (3) Opportunity to the dollar. When interest rates
an exclusive interview with Mr Juan cost, and (4) momentum. increase, investors are compelled to
Carlos covering central banks, the put money into banks as opposed to
main factors driving gold, and the The first two drivers - economic investing in other things like gold.
outlook for the Indian market. expansion/risk and uncertainty
are linked to the dual nature of gold. So that can create headwinds, and
Bullion World - As mentioned in Consumer demand – jewellery, momentum is just going to come.
your presentation, the central technology, and so on - is positively It gives you a positive or negative
banks purchased a record linked to economic expansion. trend depending on where you are in
quantity of gold in 2022. Who Economic expansion is a sustained the system. But those two are more
were the main buyers? Is it one, economic growth characterised by short-term.
or do you see a continuity this rising real output and typically rising
year too? employment, prices, and profit. The dollar has strengthened a lot
As we all know, central banks play already against other currencies. It is
a vital role in the pricing of gold and When the economy grows, people strengthening partly because of US
have a big influence over the market. will have more disposable income growth expectations and increasing
The magnitude of purchases from and can spend more on jewellery interest rates.
central banks last year certainly and technology, and all of those
hit a record. But this cannot be factors support the demand side of In response, all other central banks
considered as an exception. Central gold. Positive economic growth is too started increasing their interest
banks have been consistently not harmful to investment. It is often rate. The dollar has been weakening
buying gold for the past 13 years. the case that when you have positive recently. The falling differential is
Hence the year 2022 marked the economic growth, you have less already creating a slightly more
13th consecutive year, of net, risk in the market. Risk is one of the favourable environment for gold.
central bank purchases. Central drivers of investment. And so when On the interest rates, the US might
bank purchases are a regular there's higher risk, you can have increase it further, but it will likely
phenomenon that is happening, more need for hedging and so on not increase as much, especially
these banks buy a little bit more or Let me give you an example. In from the Fed’s perspective and even
a little bit less, but you start to see 2010 and 2011, emerging markets some of the European central bank’s
significant diversity. Here, we have rebounded from the global financial perspective; interest rates are slightly
seen significant diversity happening crisis. So, there was support for closer to where they need to be.
for the past 13 years. that. Yet the Western world was
experiencing the European sovereign
Bullion World - Could you explain debt crisis and was still in risk-off
the different factors that affect mode. We can have circumstances
the price of Gold? where both factors are positive.
One of the most important things In this case, the supporting factor
about gold is that it has a dual for consumer demand is emerging
nature. It's an asset that is both a markets but also supporting demand
consumer good (an adornment, for investment in other markets.
a piece of jewellery, a part of the The first two factors do not always
technology, and so on) and an go against each other even though
investment. Those two market oftentimes it may happen. The point
segments do not move for the same is that those two drivers tend to have
reasons simultaneously. more of a long-term effect on gold.

I'll explain to you how that works. Let us understand the next two
Generally speaking, our analysis sets of drivers - opportunity cost
shows that there are four drivers of and momentum. Opportunity cost
gold (1) Economic expansion, (2) is usually linked to interest rates

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