Central bank and consumer demand are propping up the gold price
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(Kitco News) - Central bank and consumer demand is helping prop up the gold market according to the FT.
The article states that the price of physical gold has been trading at a premium in China, the world's biggest consumer of the commodity. In addition to this, the amount of gold withdrawn from the Shanghai Gold Exchange doubled in March from a year earlier to 168 tonnes, according to exchange data.
According to John Reade, chief market strategist at the World Gold Council this could have been used to replenish inventories in the manufacturing and retail sector following a strong period during the Chinese Lunar New Year in February.
Elsewhere, demand for gold jewellery has also rebounded in India, where imports hit a near two-year high in March of 98.6 tonnes. It is wedding season at the moment in the nation and gold gifts are also given for Akshaya Tritiya a special day in the nation.
The FT report also stated that central bank demand has been strong. They are said to have bought 8.8 tonnes of the yellow metal in February with India, Uzbekistan, Kazakhstan and Colombia adding the largest amounts. Hungary has increased its gold holdings from 32 tonnes to 95 tonnes last month, stating they are “taking into account the country’s long-term national and economic policy strategy objectives”. They added “The appearance of global spikes in government debts or inflation concerns further increase the importance of gold in national strategy as a safe-haven asset and as a store of value,”.
So despite yields from fixed income offering an alternative to gold. Consumer and central bank demand could mean that there is a floor level in place at the moment. This could then spur the ETF sellers to jump back aboard the forgotten asset as prices continue to rise. Gold is trading nearly 4% higher than the low seen on 8th March and some analysts and market commentators think this could be the start of a new rally.