Rua Gold Inc. (TSXV: RUA, OTC: NZAUF, WKN: H8E)
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Commodity analysts at WisdomTree noted in their latest research that despite some short-term risks, gold is a highly sought-after asset in times of economic, financial and geopolitical tension, and these favourable factors could drive sentiment towards gold even higher. If U.S. inflation remains stubbornly high despite the Fed’s rate cuts, gold could rise to $2,970 an ounce, while silver should follow suit.
During Thursday’s trading, COMEX gold futures contract broke through the $2,500 per ounce, peaking at $2,502.8 per ounce, setting a new record.
The market generally believes that, after Powell gave a more clear guidance on rate cuts, if the July-August data does not appear to be particularly over-expected, it is expected that the Federal Reserve’s 18 September meeting will adjust the dot plot and start the interest rate cut cycle. This, coupled with the intensification of geopolitical conflicts, has also boosted gold price movements to some extent.
However, to say that the primary driving factor behind the support of the precious metal prices continue to rise, it should be counted on the strong central bank purchase demand in the past two years.
The latest data released by the World Gold Council (WGC) shows that global demand for precious metals in the second quarter rose by 4% year-on-year to 1,258 tonnes, the strongest second-quarter demand since the statistics were first published. Global gold demand was fuelled by strong over-the-counter (OTC) demand in the second quarter, which rose a remarkable 53% year-on-year to 329 tonnes.
Global gold holdings by central banks and official institutions increased by 183 tonnes in the second quarter, a slowdown from the previous quarter but still up 6% year-on-year, the WGC report said.
The second quarter also saw a number of positive signs in the gold market, including strong retail investment demand in Asia, significant gold ETF outflows in Europe in April, which turned into inflows in May and June, and a marked slowdown in gold ETF outflows in North America compared to the previous quarter.
Although record gold prices weakened demand in the jewellery sector somewhat, overall demand in the first half of the year remained stable compared to the same period last year, thanks to stronger than expected demand in the first quarter. And it’s worth pointing out that demand for gold in the technology sector continued to grow, jumping 11 per cent year-on-year, thanks largely to the artificial intelligence boom in the electronics industry, which drove demand for the precious metal up 14 per cent year-on-year.
Meanwhile, gold supply rose just 4% year-on-year in the second quarter, with mine production increasing to 929 tonnes. Recovered gold was up 4 per cent compared to the same period in 2023, the highest for a second quarter since 2012.
Louise Street, senior market analyst at the World Gold Council, said the long-awaited Fed rate cut is coming, and investors’ interest in gold in Western markets has been rekindled, with gold ETF inflows increasing. The continued recovery of this part of the investment may change the demand dynamics in the second half of 2024.
