In the wake of significant losses experienced by gold this week, driven by speculative investor concerns regarding the Federal Reserve’s postponement of its easing cycle possibly until after the summer or even after the U.S. elections in November 2024, industry analysts anticipate continued support for the precious metal from robust demand in China and other Asian markets.
While short-term price pressures may persist, experts at Metals Focus suggest that the underlying demand from Chinese and other Asian investors remains resilient and is poised to uphold upward price trajectories throughout 2024.
Chinese appetite for gold has been notably robust, with retail investors willing to pay a premium since late 2023. This premium, averaging around $40 above the gold benchmark set by the London Bullion Market Association, has persisted through the early months of 2024, underscoring the sustained interest in the precious metal within the region.
In a recent research report, analysts from Metals Focus highlighted a departure from historical trends, noting that despite surging gold prices surpassing $2,400 per ounce, Asian investors have continued to favor physical bullion over traditional selling practices.
“While soaring prices have dampened jewelry consumption, optimistic price projections, coupled with limited investment alternatives in certain regions, have bolstered demand for gold bars and coins, mitigating widespread profit-taking in Asia and the Middle East,” stated the analysts in their report. “Even amid a potential decline in Western retail investment, global sales of small bars and coins are anticipated to experience a marginal uptick in 2024.”
Metals Focus remains bullish on Chinese gold demand, projecting sustained growth in 2024 following a notable 28% surge in 2023.
Analysts attribute the robust demand in China to a dearth of viable wealth preservation options amidst escalating economic uncertainties.
“Significantly, in 2023, both the total area and sales of commercial housing witnessed year-on-year declines of 8.5% and 6.5%, respectively. Meanwhile, equity markets, as represented by the Shanghai Composite Index and Shenzhen Component Index, faced prolonged pressures throughout the previous year, with recent rebounds exhibiting signs of stagnation,” noted Metals Focus. “Amidst these conditions, gold emerges as a favored safe haven and portfolio diversifier among investors.”
Furthermore, analysts underscored the influence of governmental initiatives, highlighting the consistent gold acquisitions by the People’s Bank of China (PBoC) over the past 17 months.
“The PBoC’s sustained diversification into gold likely reinforced local investors’ confidence in the metal, cementing its role as a hedge against market volatility and financial instability,” added the analysts.