Gold investor demand can still drive prices higher - World Gold Council's Reade
The gold market has been hit with significant selling pressure as prices push below psychological support at $1,900 an ounce; however, one market strategist is not worried about the recent price action.
In an interview with Kitco News, on the sidelines of the virtual Denver Gold Forum, John Reade, chief market strategist for the World Gold Council, said that after gold's run to an all-time high above $2,000 an ounce, a correction at this point would be a healthy move.
Reade noted that one risk in the marketplace is the fact that the gold market has only one pillar of support; investment demand. He added that in his 35 years in the gold industry, he has never seen a bigger dichotomy between investment demand in exchange-traded funds, compared to the physical markets.
"We saw a complete collapse in consumer demand for the first half of the year," he said. "Fortunately, foreign investment demand, particularly from North America and Europe, is more than enough to offset that consumer weakness."
Although the gold prices have dropped as investment demand has faltered, Reade said investors should look past the current volatility and look at the long-term trend.
"Investors have shown their metal to me and I would expect to see investment demand strong in a balance of 2020 and into next year as well," he said. "There's too much risk and uncertainty out there at the moment and that's usually a very strong driver of investment flows."
Reade added that he expects interest rates to remain low for the foreseeable future, which is another significant support for the precious metal.
"I wonder whether I'll ever see an interest rate hike again, and I'm not that old," he said.
Not only is investment demand expected to remain healthy, but Reade said that activity continues to improve after the gold market was rocked by supply-chain crunch at the start of the COVID-19 pandemic. He noted that the spread between Comex gold futures and spot prices have come closer together.