World Gold Council estimates upward trend in gold investment

By Nuran Erkul

LONDON (AA) – The World Gold Council expects an upward trend in gold investment as gold demand broke a record this quarter, with continuing investment flows, Juan Carlos Artigas, head of research at the World Gold Council, told Anadolu.

“I think that there is still a lot of pent-up demand from the investment side, (… and) it is likely that you can continue to see stronger influence into gold, because the gold market, from an investment side, does not feel, does not seem, saturated,” he said.

Artigas stated that India’s demand in particular is stronger than expected and has been effective in breaking the gold demand record this quarter, while declining policy rates in the US and Europe led to reduced opportunity costs of holding gold.

Meanwhile, geopolitical tensions in the last few years contributed to the demand.

“Gold has a dual nature—you have the investment side and (…) the consumer side—(while) jewelry demand was negatively affected, both by higher prices, but also by more constrained economic growth (in China); therefore, (…) the combined effect of both higher prices and constrained economic growth have a very visible effect on demand in China, (though) it will depend, region by region how this is expressed, as (…) higher prices do tend to create headwinds for consumer demand,” said Artigas.

He noted that people take advantage of the safe haven feature of gold as a hedging strategy against risks, and as the risk goes up, so does investment in gold.

- ‘As interest rates come down, it can make gold more attractive’

Artigas stated that gold is a “fairly effective risk hedge” against inflation, geopolitical tensions, and market volatility.

“As interest rates come down, that can make gold more attractive, (…) (and) we did see fairly strong investment flows happening in the first half of the year (and) we continue to see some of that effect, especially coming through when we’re looking at the October numbers for callback ETFs, and China has been a strong contributor to that, (…) so there’s still appetite from the investment side in China to follow that trend,” he said.

Artigas mentioned that if gold prices continue to increase rapidly, consumer demand may be a little more restricted.

“Consumers eventually tend to adapt to higher prices, but it takes a little bit of time, so if the gold price is moving higher fairly quickly, that tends to accelerate consumption, and also may accelerate recycling,” he noted.

“We’re keeping a close eye on the central banks, as they were very important to reduce demand over the past couple of years, (and) so far, demand has remained robust, but it is likely going to be lower than what it was last year (but still) above average, (…) (as) we haven’t seen a lot of appetite from central banks to gold selling, but there has been some tactical pauses in continuing to adding reserves,” he added.

He highlighted that many central banks make gold purchases and no single central bank can dictate the demand and purchases.

- Impact of US presidential elections

Artigas stated that both a Harris and a Trump win in the US elections on Nov. 5 can benefit gold due to the foreign and monetary policies of the two candidates.

“It's likely that the US (public) debt may continue to increase, (…) creating quite a bit of concern around the world, and especially for investors,” he said.

Global gold demand rose 5% year-on-year to over 1,300 tons, reaching a record high, according to the World Gold Council’s Gold Demand Trends Q3 report on Wednesday, and the strong growth in demand reflected in prices, while the value of demand rose 35% on an annual basis, exceeding $100 billion for the first time.

The third quarter of the year saw consecutive record highs in gold, as its average price was 28% above the level of the same period last year, while the average price of gold reached $2,474 per Troy ounce in the third quarter.

*Writing by Emir Yildirim in Istanbul