Though gold price has fallen from the peaks of April-May, which has prompted customers to step into stores again, the yellow metal’s rate could easily rise again. Why? According to the World Gold Council (WGC), central banks across the globe could buy more gold over the next 12 months, driving up prices again.
The CEO of the World Gold Council, David Tait has already said that the Chinese central bank is waiting for the prices to touch $2,200 per ounce again before resuming buying spree.
The dramatic rise in gold prices is substantially attributable to the buying spree of central banks. But the rising prices of the yellow metal deterred banks from continuously buying gold. In May, the Chinese central bank paused buying gold. Positive data of hiring in the US also strengthened the dollar that also led to a dip in the price of the precious metal.
But according to the 2024 Central Bank Gold Reserves Survey conducted by the WGC, central banks displayed a positive sentiment towards gold with 29% of the banks saying they would buy more gold in the next 12 months. As many as 81% said that official sector gold reserves would also rise in the same time period.
49% in 17 months
During the survey, 69% of the central banks said that the share of gold in their reserves will be higher in the next five years. In the same survey conducted last year 62% of the banks had said so.
In the 17 months between October 2022 and May 2024, gold prices in the global markets jumped from $1,631 an ounce to $2,427 — a leap of almost 49% — and the action of central banks is believed to be a major driver.
It is quite obvious that the significance of gold as a long-term store of value is still much sought after by the central banks, which is why they have been hoarding it for the past several months with great vigour during economic and geopolitical tension.
Recently, The People’s Bank of China (PBoC) emerged as the largest institutional buyer of gold in the world. Last year, it bought 225 tonnes of the precious metal, an amount which was 1400% more than what Reserve Bank of India did in the same year.
PBoC halted its buying spree in April this year when prices reached the peak and paused purchases in May. While it bought 3.9 lakh ounces in February, the quantity dipped by almost 59% to 1.6 lakh ounces in March.
The Chinese central bank bought only 0.6 lakh ounces in April before completely halting it the next month. The pause in May was a break after continuously buying gold for 18 consecutive months.
But if they start buying again, prices could rise again in the Indian market too.
Big Indian imports
In the global market gold prices stood at $2,450.05 per ounce on May 20. It has now come down to $2,539.07.
Every year India imports a lot of gold and a rise of gold in the world markets impacts the orice of gold in this country.
While the price stood at over Rs 74,000 per 10 grams of 24 carat gold on May 20, the prices have inched down to below Rs 71,000 on June 20. (One ounce equals 28.35 grams.)
In April-May, jewellers said that sales went down and 90% of those who came to the stores were only trying to exchange their gold for new jewellery. But in June jewellers such as Senco Gold & Diamonds and Jayalukkas told the media that about 10-15% rise in sales has taken place after the prices came down a bit.
This picture could again change if the central banks pick up pace again.
Gold price has come down off the peaks in May after central banks paused their buying spree of the yellow metal. But prices might go up in the global market if they resume purchase. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
