China leads regional gold demand

The World Gold Council (WGC) May Gold Market Commentary said that gold prices rose 2% to $2,348 an ounce in May, marking the third consecutive monthly gain. Although the increase was smaller than in March and April, gold prices still reached an all-time high of $2,427 an ounce in mid-May before falling. The market excitement pushed long managed money positions on the COMEX (US futures exchange) to a four-year high.

The WGC’s Gold Yield Allocation Model (GRAM) does not point to a single variable driving gold’s performance in May. Positive factors include gold’s price momentum and a weak US dollar, but their impact is negligible. The biggest factor remains the unexplained component, likely due to decentralized, off-exchange gold trading and strong central bank buying.

In May, world gold prices maintained a continuous increase of 2%. Photo: Pixabay

Gold exchange-traded funds (ETFs) recorded their first monthly inflows since May 2023, totaling $529 million, boosting total assets under management (AUM) by 2% to $234 million, the highest since April 2022. However, the amount of gold in the fund is still 8.2% below the average level in 2023.

ETFs in Europe and Asia drove global flows, with Asia recording its 15th consecutive monthly inflow of $398 million in May, which was seen as the lowest since November 2023.

China led the region’s gold demand as domestic gold prices hit record highs and its currency weakened, while Japan saw strong inflows thanks to attractive domestic gold prices. Asia has attracted $2.6 billion so far in 2024, making it the only region to see inflows into ETFs, with total assets under management in Asia up 41%, the highest on record.

“The gold market situation depends on US growth and inflation data. The USD reversed in May after a long rally since early 2024 as inflation trended lower, giving the US Federal Reserve more flexibility to adjust interest rates. The weakness in the USD could be beneficial for gold. In addition, the USD is heavily influenced by less optimistic economic data and the global growth rate outside the US could reduce the performance of the currency,” said Shaokai Fan, Director of Asia-Pacific (excluding China) and Head of Global Central Banks at the World Gold Council.

Gold has recently almost outperformed the US dollar as buyers in emerging markets appear to be less concerned about the US dollar or expectations of Western monetary policy, said Shaokai Fan. A weaker US dollar in the future could attract Western investors back to the gold market who are waiting for a boost.

The US Federal Reserve previously announced it would keep interest rates steady and only cut them once in 2024 despite some improvement in inflation, as growth and unemployment remained at levels better than what the US central bank considers sustainable in the long term.

Higher interest rates increase the opportunity cost of holding gold, so the precious metal has lost momentum. However, investors are still predicting the possibility of the US central bank cutting interest rates by about 50 basis points later this year.

Source: https://congthuong.vn/trung-quoc-dan-dau-ve-nhu-cau-vang-trong-khu-vuc-326158.html