The gold market is currently experiencing a rally, with strong investment demand driving up prices. However, a report from Commerzbank’s Commodity analyst Barbara Lambrecht suggests that this rally may lose momentum due to weakening physical demand. While long-term investors are showing increased interest in gold, high prices are likely to deter buyers in Asia, particularly China and India.
The upcoming quarterly report from the World Gold Council, scheduled for release on Wednesday, is expected to shed light on the current state of the gold market. In the third quarter, nearly 100 tons of gold flowed into ETFs, indicating strong investment demand. However, Lambrecht notes that high prices may be deterring physical demand, with China experiencing a significant drop in gold imports. Data on gold shipments in September from the Hong Kong Statistics Authority will provide further insight into the state of the market.
In India, the reduction of import taxes in August led to a surge in gold imports. However, by September, imports had already started to decline. This fluctuation in demand is a clear indication that high prices are influencing physical demand in major gold-consuming regions. For the long-term outlook of the gold market, this weakening physical demand could potentially dampen the bull market and slow down the rally that has been seen in recent months.
Lambrecht’s analysis suggests that the combination of strong investment demand and weakening physical demand could have a significant impact on the gold market in the near future. While investors continue to show interest in gold as a safe haven asset, the high prices and reduced demand from major consumer markets like China and India may put a damper on the rally. The upcoming report from the World Gold Council will provide more data and insights into the current trends in the market and how they may impact the future of gold prices.
For investors looking to navigate the gold market in the coming months, it will be crucial to monitor both investment and physical demand trends. Understanding how these factors interact and influence one another will be key to making informed decisions about buying or selling gold. With the potential for weakening physical demand to dampen the bull market, investors will need to stay vigilant and adaptable to navigate the changing dynamics of the gold market. The upcoming report from the World Gold Council will be a valuable resource for understanding the current state of the market and making informed decisions about gold investments.
