https://www.miningweekly.com
Gold|Mining|supply-chain|Products
Gold|Mining|supply-chain|Products
gold|mining|supply chain|products

WGC notes increased investor interest

26th June 2020

By: Mamaili Mamaila

Journalist

     

Font size: - +

The strength of investor interest in gold, particularly once Covid-19 lockdowns became more widespread, is clearly evident in the demand from institutions and investment professionals for gold-backed exchange-traded funds, says gold industry market development organisation the World Gold Council (WGC).

There have been six consecutive months of net purchases, with growing demand every month, WGC market relations head John Mulligan notes.

“The global assets under management in these products now represent about

 3 500 t of gold, which is valued at more than $190-billion. Additionally, more than 600 t of those gold holdings were bought this year,” he tells Mining Weekly.

However, Mulligan notes that the gold market – even before the impact of Covid-19 – was increasingly driven by demand from investors looking to protect themselves from risks on the horizon - low return opportunities, low interest rates and major debt burdens.

These factors, he says, have all now been exacerbated and accelerated by the lockdowns and consequent policy responses seeking to shore up struggling economies.

“In addition to strong gold exchange-traded fund demand, we might expect that, when the lockdown restrictions are lifted, private and/or retail investment demand will also grow quite quickly as people gain access to physical gold products that have been out of reach during the lockdowns.

“Investment demand will, therefore, likely remain the primary driver of the gold market and a key source of demand for much of 2020, and this form of demand typically translates into a buoyant price.”

He refers to the significant injections of monetary stimulus, which support gold demand in a number of ways, in response to the economic ravages of Covid-19.

For instance, low, zero or negative interest rates remove the opportunity cost of holding gold, in that there is far less incentive to place money elsewhere, as this is unlikely to generate any additional income.

“Negative-yielding bonds will actually cost investors for the privilege of owning the asset,” he adds.

Concurrently, the printing of money to fund the post-pandemic recovery is likely to accelerate currency debasement, also potentially pushing investors to gold – given its proven performance as a robust store of value over time, says Mulligan.

“The gold market has again demonstrated its inherently balanced structure and its relative resilience, with recent demand slightly up – based on the same period the previous year – even as the lockdowns devastated the wider markets,” he states.

Similarly, gold’s price profile and its outperforming of nearly all other asset classes has reinforced its benefits as a safe haven and market insurance, and these factors will continue to be key drivers over the next few years.

Mulligan notes that broader consumer demand for gold, particularly gold jewellery, will likely take longer to recover. The drivers that will shape this future demand are not specific to gold, but will rather depend on broader economic prospects and consumer confidence, which may vary greatly in gold’s key markets.

In China and India, for example, income expectations may take some time to recover and any immediate gold market recovery may also be hampered by recent disruptions to local stock flows and seasonal buying, he says.

“While gold mine production is likely to fall a little this year, owing to shutdowns in some key locations, the industry was far less disrupted than many other sectors and we do not expect any major structural changes to the supply-demand dynamic.”

Further, with strong price expectations, recycled supply should easily compensate for falls in newly mined gold.

Overall, the balanced structure of the gold market and the relatively robust nature of the gold supply chain suggest demand may remain resilient, even if consumer sectors take a little longer to recover.

Edited by Nadine James
Features Deputy Editor

Comments

Latest News

Resources Watch
Resources Watch
27th March 2024

Showroom

Booyco Electronics
Booyco Electronics

Booyco Electronics, South African pioneer of Proximity Detection Systems, offers safety solutions for underground and surface mining, quarrying,...

VISIT SHOWROOM 
Rittal
Rittal

Rittal is a world leading provider of top-quality integrated systems for enclosures, power distribution, climate control, IT infrastructure and...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Hyphen, Eva mine, ferrochrome price make headlines
Hyphen, Eva mine, ferrochrome price make headlines
27th March 2024
Resources Watch
Resources Watch
27th March 2024

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.115 0.149s - 95pq - 2rq
Subscribe Now