Gold News

Gold Price Rebounds from $1900 as 'Unreported' Central-Bank Buying Boosts Global Demand

The GOLD PRICE fell and then rebounded from 2-week lows against a rising Dollar in London trade Tuesday, heading into tomorrow's much-anticipated US Federal Reserve decision on interest rates just shy of $1920 per ounce after the world's largest gold ETF saw a small outflow overnight.
With the price of gold dipping within $1 of $1900 per ounce before rebounding, new data from the World Gold Council meantime made headlines by reporting the heaviest global gold demand since 2011 for last year as a whole.
"Colossal central bank purchases, aided by vigorous retail investor buying and slower ETF outflows, lifted annual demand to an 11-year high," says the mining-industry-backed WGC, now marking 30 years of its regular and widely-respected Gold Demand Trends reports.
Despite that rise in total demand however, gold prices were dead flat in Dollar terms in 2022, rising just 0.08% on the previous year’s annual average for gold's weakest price increase since the bottom of the bear market ending in 2015 thanks to large private investment flows to physical bullion turning negative, gold-backed ETF trust funds shrinking, and speculators cutting their bullish betting on futures and options contracts.
Chart of global gold demand in tonnes. Source: World Gold Council
Making a substantial estimate for unreported official-sector gold demand to put 2022 as the strongest such year since before the Bretton Woods gold-Dollar monetary system collapsed 5 decades ago, "Central bank buying [in 2023] is unlikely to match 2022 levels," the WGC said today, launching its new report.
"Lower total [foreign-exchange] reserves may constrain the capacity to add to existing allocations. But lagged reporting by some central banks means that we need to apply a high degree of uncertainty to our expectations, predominantly to the upside."
"There is chatter in the markets about the lack of reported increases in China’s central bank holdings," says precious metals specialist Rhona O'Connell at brokerage StoneX.
Comparing Swiss export data for bullion shipped to Hong Kong against the city's domestic consumer demand plus China's wider jewelry-plus-retail-investment as well as the country's world No.1 gold-mine output, "there is a shortfall of roughly 350 tonnes to make up," O'Connell adds, saying that "these numbers are likely to increase" the view that the People's Bank is under-reporting its gold reserves.
"While it is possible that some of [the over-supplied] metal may have come back out of the country...the extra would certainly account for the reported increase in [China's] central bank reserves of more than 60 tonnes in the latter part of the year."
Action in gold-backed ETFs was mixed on Monday, with the giant SPDR Gold Trust (NYSEArca: GLD) shrinking by 0.2% to its smallest in 5 sessions, while the smaller iShares gold trust (NYSEArca: IAU) was unchanged at its largest since mid- November, not seeing any net outflows of investment cash since Christmas Eve.
On the Chinese wholesale market's 2nd day back from the Lunar New Year spring festival holidays, gold prices in Shanghai edged lower overnight from yesterday's 28-month Yuan gold highs, trimming the city's benchmark price ¥3 per gram to ¥419.
Betting on tomorrow's US Fed decision meantime put a 99.8% certainty on a rise of 0.25 points – the smallest since the US central bank began 'lift off' from zero rates this time last year – after last week's PCE data said inflation in the world's largest economy continues to slip from 2022's 4-decade highs.
Gold priced in the Euro also sank and rebounded, regaining its €15 down-spike to trade back at €1770 per ounce, while the UK gold price in Pounds per ounce rose back above £1560 – a new record high when first reached on Russia's invasion of Ukraine 11 months ago – following a downgrade to the UK's economic outlook from the International Monetary Fund.
With the IMF now saying UK GDP will shrink in 2023 while the rest of the developed world grows, "remember the UK outlook is just a couple of researchers in [Washington]" who work from external forecasts from the Bank of England and UK Treasury, says former Bank of England economist Tony Yates. "There is no gigantic seeing intelligence with independent insight."
In contrast to the gold price – and enjoying no central-bank demand, official or unreported according to expert analysts – silver prices today dipped through $23 per ounce for the 2nd time in 6 weeks before rallying 50 cents in barely 2 hours.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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