Gold maintains glitter as haven for investors

Gold investment in China is expected to remain in positive territory over the next few quarters, supported by expanding demand, economic recovery and sustained purchases by the central bank, said industry experts.

The attractiveness of gold is expected to increase in the months to come, fueled by prudent domestic monetary policy and lower interest rates, which will further reduce the cost of investing in gold and prompt investors to seek other wealth storage options like precious metals, said Wang Lixin, CEO of the World Gold Council (China).

Furthermore, softness in the real estate market and escalating global geopolitical tensions may also contribute to the growth of retail investment demand for the yellow metal, a mainstream asset that generates sustained and stable returns, Wang said.

As the record-breaking pace of gold purchases by central banks worldwide continues to attract attention, retail investor interest in gold is likely to remain high, he added.

Central banks worldwide continued their strong appetite for gold, setting a new first-quarter record for net purchases, according to the latest report by the WGC.Official global gold reserves grew by a net 228 metric tons in the first quarter, surpassing the previous first-quarter record set in 2013 and marking a 68 percent increase compared to the five-year quarterly average, it said.

Gold prices have soared in recent months, reaching a series of record highs as investors anticipate a potential decline in interest rates in the United States. Central bank gold purchases, a trend that began in 2022, have further contributed to this upward momentum, with Turkiye, China and India leading the way, said the council.

"The strong start reinforces the view that central bank demand will remain robust in 2024," it said.

The People's Bank of China continued its purchasing streak, adding 57 tons to its gold reserves in the first quarter, marking the 17th consecutive month of increases. This strategic accumulation has bolstered China's gold holdings to 2,262 tons, as the country seeks to diversify its reserves.

According to the China Gold Association, China's gold consumption rose 5.94 percent year-on-year in the first quarter, with consumption of the precious metal by the world's largest consumer amounting to 308.91 tons.

Louise Street, senior markets analyst at the council, said a number of factors are behind the recent surge, including heightened geopolitical risk and ongoing macroeconomic uncertainty driving safe-haven demand for gold.

In addition, the continued and resolute demand from central banks and increased net buying in the derivatives market have all contributed to the higher price of gold, Street said.

"Looking ahead, 2024 is likely to produce a much stronger return for gold than we anticipated at the beginning of the year, based on its recent performance," Street added.