Gold bulls are divided： global central banks increase their holdings of ＂Chinese aunts＂ and wait and see
China news agency, Beijing, August 3 (Reporter Chen Kangliang, Huo Chenmeng) Since the beginning of this year, the gold market has been bullish, and the international gold price has gone up all the way. In the second quarter, it broke through the $1,400 mark per ounce, hitting a six-year high. In the face of high gold prices, gold bulls seem to have differences in operation: on the one hand, global central banks continue to watch more and increase their holdings substantially; On the other hand, the "Chinese aunts" who once "shook" Wall Street turned to wait and see more.
According to the Gold Demand Trend Report recently released by the World Gold Council, in the first half of this year, the global gold demand increased by 8% year-on-year to 2,181.7 tons, a new high in the same period of the past three years.
The report pointed out that one of the main reasons for achieving the above growth rate is the continuous purchase of gold by central banks. Statistics show that in the second quarter, central banks bought 224.4 tons of gold. This means that in the first half of this year, the total amount of gold purchased by central banks reached 374.1 tons, setting the largest net increase of global official gold reserves in the same period since the World Gold Council had statistics.
In this regard, He Lesi, director of the Market Information Consulting Department of the World Gold Council, said that in June, the price of gold broke through the $1,400 mark for the first time since 2013, and the price of gold denominated in other currencies increased more significantly. The main factors driving the upward trend of this round of gold price include the expectation of interest rate cuts by some central banks such as the Federal Reserve and geopolitical uncertainty, and the strong buying of gold by global central banks is also an important support for gold price.
The Bank of China is no exception. According to the data disclosed by the Bank of China, by the end of June, 2019, the gold reserve of the Bank of China was 1,926.55 tons, with a total increase of 74.03 tons in the first half of the year, and it has increased its holdings for seven consecutive months since December, 2018.
Wang Lixin, managing director of the World Gold Council in China, believes that from the data point of view, the central bank’s purchase of gold has become the highlight of China’s gold demand in the second quarter of 2019. The diversification of reserves and the demand for safe and liquid assets are the main driving forces for the central bank to purchase gold.
In addition, it is expected that more central banks of emerging market economies plan to join the ranks of gold purchases. According to the results of the 2019 central bank gold reserve survey released by the World Gold Council’s central bank and public policy affairs team, 11% of the central banks interviewed in emerging markets and developing countries indicated that they intend to buy more gold in the next 12 months. In addition, 39% central banks in emerging markets and developing countries believe that gold will be an important asset when the international monetary system changes significantly.
It is worth noting that while central banks are buying gold on a large scale, many China consumers, especially Chinese aunts, seem to be starting to wait and see.
Ms. Li, a 52-year-old "Guangzhou Aunt", said in an interview with China News Service that she has always been keen on buying gold. On the one hand, I have a soft spot for gold jewelry, on the other hand, I like the anti-inflation characteristics of gold. At the end of last year, she used her spare money to buy some gold jewelry, and at the current price, it probably increased by 30 yuan RMB per gram. But recently, due to the high price of gold, she didn’t buy it.
Ms. Li further stated that because she didn’t have spare money at that time, she didn’t join the gold rush in 2013, thus avoiding the "quilt cover" in the later period of opening. In hindsight, she was lucky and made her more sensitive to the price of gold. "Although many experts say that gold will rise in the future, I feel that the risk is still relatively large. I mainly want to preserve and increase the value, so I still want to buy when the price is low."
There is also Ms. Wei who lives in Beijing and is now retired. Ms. Wei told the reporter of China News Service that she bought a gold-encrusted longevity lock for her grandson a few months ago, but she didn’t want to buy it recently. Buying gold is mainly to preserve and increase the value, so it is usually bought when the price of gold falls.
It seems that there are not a few consumers with a wait-and-see attitude. According to the data disclosed by China Gold Association on the 2nd, in the first half of 2019, the actual consumption of gold in China was 523.54 tons, down 3.27% compared with the same period in 2018.
In Wang Lixin’s view, China consumers continue to pay attention to high-end gold jewelry products with innovation and higher hardness, but the rapid rise of gold price in the short term has restrained the consumption demand of gold to some extent.
Rao Yulei, director of the Financial Innovation Research Center of Central South University, reminded that gold is a highly stable asset, but its proportion in household assets should not be too high. Ordinary consumers should give priority to the safety of family assets when investing in gold, and make rational consumption, which should be controlled within 10% of family assets. (End)