The World Gold Council expects
growth in demand for gold
14
January 2021
The
continuing high demand from investors and the nascent jewelry industry may feed
the demand for gold in the new year. That's according to the World Gold Council
(WGC) in a market study released Thursday.
Concerns
about rising government debt and higher inflation are likely to continue the
strong influx of gold-backed index funds. Funds in which suppliers deposit a
certain amount of gold for each unit sold have already been the cause of rising
gold prices last year.In 2020 alone, the amount of gold managed by index fund
providers increased by 860 tons to more than 3,600 tons, according to WGC data.
Together, index fund providers are now the second most important player in the
gold market after the US Federal Reserve and before the Bundesbank (German
central bank).
According
to WGC experts, the boom in gold index funds suggests that many investors have
invested strategically, ie. in the long run, in gold. However, the importance
of speculative bets on futures markets for gold demand has diminished.Signals
from the US Federal Reserve and the European Central Bank to keep interest
rates low for a long time, as well as to tolerate inflation above two percent,
will keep high demand for precious metals by strategic investors.
Risk of rising interest rates
The
price of gold has traditionally been strongly linked to real interest rates, ie
the nominal interest rate minus inflation in important financial markets such
as the United States. The low or even negative real interest rates that
currently prevail in the United States mean that gold is attractive as an asset
class compared to government bonds. Because gold does not generate any
interest, it is considered by many investors to protect against inflation.However,
rising interest rates on US government bonds could become a problem for the
price of gold if inflation expectations do not rise as well, and thus keep real
interest rates low. More recently, the rise in ten-year US government bonds and
the stronger dollar have kept the price of gold "under control" below
$ 1,900 an ounce, writes Carsten Fritsch, a commodity markets expert at
Commerzbank.Central banks are also likely to return to buyers in 2021, WGC
experts expect. In 2020, central banks sold almost as much gold as they bought.
For example, during the corona crisis, Turkey launched large quantities of
precious metals on the market. For next year, the World Gold Council expects
central banks' demand for gold to slightly exceed their supply.
Source:
https://www.investor.bg/surovini/365/a/world-gold-council-ochakva-ryst-na-tyrseneto-na-zlato-319909/