Gold prices have been hovering around record high above Rs 62,000 per 10 grams in India for about a month. The World Gold Council's latest “Gold Demand Trends” report says the gold demand will remain strong throughout the year.
The report reveals that while gold demand (excluding Over The Counter) was 13 per cent lower year-on-year, a recovery in the OTC market propped up total gold demand to 1,174 tonnes, a slight 1 per cent increase compared to Q1 2022.
A perspective on factors fuelling the demand will give a better sense of whether gold will continue to provide lucrative returns. "With the price near record average highs for the quarter at $1,890 per ounce, a mixed picture for gold in Q1 exemplifies its diverse and global sources of demand," the report said.
Will Gold Prices Keep on Rising?
A rise in gold demand will spike the prices. The report said that central banks were crucial in bolstering gold demand, adding 228 tonnes to global reserves, a Q1 record high. It underscores gold's role in international reserve portfolios during market volatility and heightened risk.
Though the World Gold Council admits that delayed reporting makes it difficult to predict the future of gold, it adds that central bank surveys indicate a positive trend in future gold demand. It expects the gold buying rate in the first quarter of 2023 to be higher by mid-2023, but the overall demand will be lower than in 2022.
Why Is Demand For Gold Rising?
Louise Street, Senior Markets Analyst at the World Gold Council, commented that gold's role as a long-term, strategic asset could take centre stage as it has a history of delivering positive returns in the last five of seven recessions.
“It is likely that investment demand will grow this year, especially with waning headwinds from the strong US dollar and interest rate hikes. Positive demand for gold ETFs has continued in Q2 so far, and the looming threat of developed market recession may trigger inflows to accelerate later in the year. Central bank buying is likely to remain strong and will be a cornerstone of demand throughout 2023 – even if at lower levels than the record highs seen last year,” he said.
Gold Demand Report
The demand for gold investments has been good in Q2 and may increase later this year if there is a risk of a recession. The supply of gold is also expected to go up due to more production in North America and China, as well as the end of disruptions in South Africa and an increase in hedging. There was an increase in demand for gold bars and coins but a decrease in demand for gold jewellery in India due to high prices. In China, demand for gold jewellery increased as lockdown restrictions were lifted.
What Investors Should Know?
It has been observed that gold and equity markets have an inverse correlation. This means that gold prices increase when markets fall because people move their money from equity to gold. Further, multi-asset allocation fund managers are recently increasing their portfolio allocation to gold, observing this trend. Therefore, investors should assess the risks and rewards of investing in gold investment avenues, such as gold exchange-traded funds (ETFs), sovereign gold bonds (SGBs), gold mutual funds and digital gold.erefore, investors should assess the risks and rewards of investing in gold investment avenues, such as gold exchange-traded funds (ETFs), sovereign gold bonds (SGBs), gold mutual funds and digital gold.