Gold consumption is hot, can the price of gold continue to be strong？
China news agency, Beijing, February 27th (Reporter Liu Yuying) In the Spring Festival of 2024, gold consumption in China was hot, and gold ornaments, the Year of the Loong gold bars and coins, and transit beads were favored, and gold consumption became a fashion.
Nowadays, gold ornaments are no longer synonymous with "tacky" in China. All kinds of gold ornaments with small weights and new styles and small golden beans with the function of saving money have entered the public consumption field, making gold a "good heart" for many people.
According to the statistics of China Gold Association, in 2023, the national gold consumption was 1,089.69 tons, an increase of 8.78% compared with the same period in 2022. Among them: 706.48 tons of gold jewelry, up 7.97% year-on-year; Gold bars and coins were 299.60 tons, up 15.70% year-on-year.
Liu Yuning, a senior gold analyst and visiting professor at China Geo University, said that the reason for the current "gold consumption craze" is that consumers hope to maintain and increase the value of assets by increasing investment options in the case of narrowing investment channels in the property market and the stock market.
Research institutions generally believe that the warming of the geopolitical situation in 2023, the large-scale purchase of gold by global central banks and the expected increase in interest rate cuts by major central banks are the main reasons for the high fluctuation of international gold prices.
At the end of December 2023, the year-end price of spot gold in London was $2,062.40 per ounce, up 12.39% from the opening price in early 2023, and the annual average price was $1,940.54 per ounce, up 7.80% from the previous year.
According to the latest Global Gold Demand Trend Report released by the World Gold Council, the demand for gold in 2023 rose to 4,899 tons, setting a new record, taking into account the demand for gold in the OTC market and other sources.
Liu Yuning said that in 2023, the US dollar was in the interest rate hike cycle, but the price of gold rose instead, which was unusual. One of the important factors is that global geopolitical conflicts continued in 2023, pushing up the price of gold. In particular, the Palestinian-Israeli conflict in October last year caused the price of gold to return to $2,000 per ounce and hit a record high of $2,146.
In addition, from October 2022 to May 2023, the US dollar was in the cycle of raising interest rates, but the market expected that the Federal Reserve would stop raising interest rates in May 2023, so gold went out of a wave of upward trend before May.
The safe-haven function of gold is also one of the reasons for the continuous rise of international gold prices since 2023. According to the data of the World Gold Council, in 2023, the global central bank’s demand for gold purchase reached 1,037 tons, reaching the second highest level in history, only 45 tons less than that in 2022, which strongly boosted the demand for gold.
In 2024, the international gold price went out of an oscillating downward market. This is mainly because the consumer price index (CPI) in the United States cooled down less than expected in January, and the expectation of raising interest rates weakened, resulting in spot gold falling below $2,000 per ounce.
In China, before the Spring Festival holiday in January, the domestic demand for gold surged, coupled with the decrease in gold imports in recent months, which led to a tight relationship between supply and demand, thus making the domestic gold price firm and forming a premium.
For the global gold price trend in 2024, analysts believe that the Fed’s interest rate cut expectations, multinational elections, and geopolitical situations will all have an impact on the price of gold.
Among them, whether the Fed cuts interest rates is the most critical factor. The minutes of the meeting at the end of January 2024 recently released by the Federal Reserve show that it is not appropriate to cut interest rates until we are more confident that inflation will continue to move towards 2%.
At present, the Fed’s interest rate cut is expected to continue to cool down, which will suppress the gold price in the short term. Capillary Research, a research institution based in Canada, believes that it is only a matter of time before the Fed gives up its inflation target and cuts interest rates to support the economy. This shift in monetary policy will push up the investment demand for gold.
In addition, global economic and political conflicts are still fermenting, and the rising tension in the Middle East has limited the further decline of gold prices, and the safe-haven property of gold will be enhanced.
Liang Yonghui, deputy general manager of Shandong Zhaojin Gold and Silver Refining Co., Ltd. believes that before the US economic recession in history, the interest rates of US 3-month and 10-year treasury bonds were upside down. At present, the upside down degree of US treasury bonds is the highest in history, and the recession risk is expected to be high, which supports the future gold price to strengthen.
Liang Yonghui believes that there is downward pressure on gold prices in the short term, but in the long run, there is no basis for a sharp decline in gold prices in the context of currency overshoot, increased geopolitical risks and expected interest rate cuts. (End)