AXMIN Inc (TSXV: AXM)
AXMIN Inc. (TSXV:AXM) is a Canadian-based exploration and development company with a strong focus on central and West Africa.
The price of gold hit a record high of $2,135.4 per ounce in December last year. So far this year, while the price has maintained above $2,000 most of the time, market participants pointed out that gold price will continue to rise due to the uncertainty of the global economic outlook and the intensification of geopolitical tensions in the Middle East，which has stimulated the demand of investors who trust gold as a safe haven.
In addition, the accelerated pace of gold purchases by global central banks in the past two years has been a key factor in supporting gold prices. Central banks have been loyal buyers of gold over the past decade or so. Global gold reserves have increased by more than 1,000 tonnes in both 2022 and 2023, suggesting that central banks’ appetite for gold is becoming greater.
Commodity analysts at ANZ Bank (ANZ) point out that central bank gold purchases have tripled as a share of global demand over the past two years to between 25 and 30 per cent. 2024, while central bank gold purchases are likely to slow from their current record levels, ANZ expects central bank demand to remain a dominant factor in the gold market for at least the next six years.
Analysts predict that central banks in emerging market countries will buy more than 600 tonnes of gold a year by 2030, bringing gold’s share of their foreign exchange reserves to 10 per cent, with China likely to account for the lion’s share of global official gold demand.
Analysts point to rising geopolitical uncertainty, increased economic risks and rising inflationary pressures as the main factors that will continue to drive central bank purchases of gold. However, ANZ also points out that there is a practical reason behind central bank gold demand, namely governments’ attempts to diversify their bond holdings. In 2021, US Treasuries accounted for approximately 59 per cent of total global foreign exchange reserves. However, bond prices have suffered over the past two years as the Federal Reserve has embarked on the most aggressive tightening cycle in the past 40 years.
At the same time, rising bond yields have pushed up the US dollar, making it more costly for countries to service debt that is largely denominated in US dollars. ANZ estimates that about 50 per cent of the decline in Asian central banks’ foreign exchange reserves in 2022 will come from valuation losses. Analysts point out that gold has become an attractive alternative to bonds as it has proved to be a stable asset over the past two years. The solid performance of gold in 2022-2023, despite a sharp rise in real interest rates globally, speaks for itself.
According to ANZ, the global monetary system is evolving and emerging markets are promoting the use of their currencies for international payments. This includes China, which is settling trade with Russia in yuan and has made clear its intention to internationalize the currency. Other regional countries, such as India, are also pushing to settle foreign trade in their own currencies. Analysts believe that in this evolving multi-currency system, foreign exchange reserves portfolio will gradually change, and gold is likely to play an important role in this process.
Analysts at ANZ said that although gold prices are still consolidating above $2,000 an ounce and the gold market is still waiting for a catalyst, central bank demand should help support a return to record highs around $2,200 by the end of the year.
