This is a new milestone and perhaps not the last. Gold passed the $2,600 per ounce mark at the end of last week. A new historic record, driven by Chinese and Indian demand, by central bank purchases, but also by the latest decision by the US Federal Reserve.
From record to record, gold continues to climb. Today, the metal is worth 25% more than at the beginning of the year, and even if it is not an investment that yields interest, it continues to be perceived as a reassuring value in a very uncertain economic environment.
The latest rise in the yellow metal was driven by the drop in US rates following that of the US Federal Reserve (FED) key rate on September 18. This drop means that investing in the dollar is less profitable and reinforces gold as a safe haven. Already on September 13, the increasing probability of seeing a cycle of monetary easing begin in the United States had pushed gold to a previous record.
As is often the case in periods of very strong geopolitical uncertainty, tensions between Israel and Hamas and the war in Ukraine are also fueling interest in the yellow metal.
Indian demand is picking up again
According to the latest data from World Gold Councilcentral banks and official institutions bought 483 tonnes of gold in the first half of the year, a record.
One country in particular has driven up this demand: India. According to the Financial Timesthe central bank bought twice as much gold in the first seven months of the year as it did in the whole of last year. But what boosted demand, even more than expected, was the reduction in the import tax on gold in late July. Even Indian traders were surprised by the surge in demand in August, when it was at its lowest level since 2020 in the first half of the year.
Chinese households favor savings products
Added to this is an increasingly significant Chinese demand, notes a study by the consulting firm Global Sovereign Advisory. According to the China Gold Association, cited by the authors of the study, Chinese households bought more than 1,000 tonnes of gold last year, 10% more than a year earlier. A trend that continued in the first quarter of 2024, with a particular attraction for savings products, to the detriment of jewellery.
Will the yellow metal continue its run and break through the psychological barrier of $3,000 per ounce? The hypothesis is no longer taboo. It is now being considered by several analysts who wonder about the time it will take to reach these peaks or about gold’s ability to maintain such levels.
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