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Perth Mint sees solid global demand for gold, silver bullion

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(Kitco News) - The start of the second half of the year may have marked a slow down in demand for bullion gold and silver in North America. However, the rest of the world continues to see solid appetite for the precious metals, according to the Perth Mint.

In an interview with Kitco News, Sawan Tanna, Treasurer for the Western Australian-based mint, said that throughout the pandemic, production has been running flat out to meet the growing demand for bullion.

According to sales records, so far this year, the Perth Mint has sold more than 506,094 ounces of gold, down about 15% from the record year seen in 2021. The drop in sales reflects slightly weaker demand in the U.S.

The U.S. gold market has struggled to attract consistent bullish momentum even as inflation has pushed to a 40-year high. However, Tanna said that it's not surprising that gold demand in the U.S. has struggled as the Federal Reserve continues to aggressively raise interest rates. The U.S. central bank is expected to raise interest rates by another 75 basis points Wednesday.

However, looking past the North American market, Tanna said that Europe and Asia continue to see robust demand for physical gold and silver.

"The European Central Bank has been slower to react to inflation, so consumers are feeling the pressure more acutely there," he said. "Geopolitical uncertainty in Europe because of the war in Ukraine is also driving demand higher compared to the U.S."

Although the Federal Reserve may be keeping inflation expectations anchored, the monetary policy comes at a cost. Recession fears have grown significantly in the last few weeks as rising interest rates slow the economy. Tanna said that a recession in the U.S. would completely change the demand outlook for bullion.

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"We would expect to see renewed demand for gold as recession fears continue to build," said Tanna. "Sentiment can change quickly if the market thinks the Fed is going to be less aggressive on interest rates going forward."

Along with solid demand in Europe, Tanna said that the Asian market also continues to grow as China's ongoing COVID lockdowns are increasing the amount of pent-up demand.

"We saw a similar issue in India; the nation was devastated by the delta variant and out of the gold market for six months. When the restrictions were lifted, we saw a flood of interest return to the gold market," said Tanna. "We would expect to see the same thing in China. Demand for gold has not gone away. It has just been delayed."

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.