Source: Zhitong Finance and Economics Network
Aakash Doshi, head of North America of Citibank's commodity research department, said in an interview with the media.PotlimitomahavideosCentral bank buyers may be less sensitive to high gold prices.PotlimitomahavideosHe points out that jewellery processing usually accounts for about 50 per cent of gold market demand, with the rest coming from investment, central bank and industrial uses.
Doshi said: "historically, demand in the gold market has been mainly driven and led by jewellery demand. Gold jewelry consumption may account for 50% to 55% of the market. In the past 10 to 15 years, this situation has begun to change. Since the 40 years before the Great Depression and the economic turmoil of the Nixon era, the central bank has been a net seller of gold, providing a net supply to the market. And after the Great Depression, you see the central bank becoming a net buyer. "
Doshi said the central bank has been buying more gold and now consumes more than 1000 tons a year, "which represents a reduction in supply in the market. From the perspective of mineral production, this is equivalent to 28% of annual mineral production. "
In the past, higher metal prices often led jewellers to reduce demand. However, the central bank is less sensitive to prices. Doshi said the central bank's purchases were more "strategic" and may be "one of the buyers least affected by price."
In a research note, Doshi predicted that gold could reach $3000 an ounce by 2025. He attributed the potential rise to strong investor demand, especially the significant increase in physical gold sales since the outbreak. He also pointed out that central bank purchases in emerging markets hit an all-time high, which was a factor driving up the price of gold.
Although gold prices have risen 20% since February, Doshi stresses that this is not driven by typical factors such as a weaker dollar or falling interest rates. He believes that the bullish outlook for gold is mainly due to strong physical demand and expectations of financial macro factors. The central bank's purchases not only set a higher price floor for gold, but also stabilized its volatility.
Doshi stressed the importance of alternative demand growth, which is related to the expansion of global debt levels since the outbreak. He believes that gold's historical price ceiling of $1000 an ounce may have shifted to a support base of $1900 to $2000 an ounce, which means that gold has the potential to maintain a high price. Despite a more hawkish monetary policy stance, Doshi believes that the risk-return ratio favours a higher gold price, especially in the context of a potential US recession, which could push gold to $3000 an ounce in the next six to 12 months.