Gold seen rangebound in second half with PBoC, geopolitics key concerns for WGC
Wed July 03 2024
Gold prices could stay rangebound in the second half for 2024 after a record run in the first half that saw a 12 percent rise year-to-date, according to the latest World Gold Council report.
The report listed out central bank buying among reasons for the sustained upmove this year, backed by demand in Asia and a lingering geopolitical uncertainty. The asset has been a one of the best performing this year, delivering double-digit returns across major currencies in 2024.
Central Bank Buying A Concern
The WGC report lists out a subdued central bank buying for the remaining year as a key risk, that could rein in the strong run in the precious metal. It pegs at least 10% contribution to gold’s performance in 2023 and potentially around 5% so far this year to central bank action, however, People’s Bank of China (PBoC) has tempered its gold purchases in recent months, thus resulting in holdings that have stayed unchanged till May.
Investors in Asian have been buyer of gold on declines, and WGC has recorded 'meaningful AUM growth' in both Indian and Chinese gold ETFs. While fundamentals of gold ownership stays in place, WGC report said any pause by the PBoC may prompt a simultaneous 'profit-taking by tactical investors'.
Trends in Jewellery Buying
Gold jewellery makes up for more than 40% of annual demand, and consumers have traditionally been key to support the price performance.
The sharp uptrend in gold price has dampened demand in India and China, but WGC hopes that 'positive economic growth can counteract some of this effect'. It is hoping for gold prices to stabilize, and thus an lure back consumers who turn cautious on volatility in gold prices.
In India, expectations of economic growth are higher than other regions, WGC said, adding that gold’s role as a store of value remains well-established here.
Source: https://www.moneycontrol.com