Insights

The local Chinese gold price premium has been surging lately: September’s average reached the highest monthly level for nearly six years.

Gold plays an important role in the management of reserve assets, being one of the few assets that are widely approved under the investment guidelines used by the world's central banks.

Healthy retail demand in September drove the local price briefly into premium, but market dynamics generated a discount for much of the month. Indian gold ETFs witnessed a marginal net inflow of 0.4t in September as a domestic gold price correction enticed investors back into gold  
 

In Q2’22 costs in the gold mining industry continued rising. The average all-in sustaining cost (AISC) reached a new record high of US$1,289/oz, up 3% q/q and 18% y/y. The average industry AISC has now sequentially increased almost every quarter since Q2’20, rising by 33% over this period.

Central bank net purchases of gold slowed to 20t in August, halving m-o-m. This is the fifth consecutive month of net purchases from the central banking sector.

Many of the investors we talk to feel that gold’s performance should be much stronger considering multi-decade high inflation across the world

The Shanghai Gold Price Benchmark PM (SHAUPM) in RMB rose by 0.5% in August while the LBMA Gold Price AM in USD saw a 2.6% fall. The average Shanghai-London gold price spread climbed further in the month, driven by stronger demand  

Central bank demand remained robust in July. Global gold reserves increased by 37t (net), below June’s 64t increase. Added to the 270 of net purchases over H1, this pushes YTD central bank demand towards the 300t mark.

I recently presented virtually at Pension Bridge Alternatives APAC - Mid Year Review, and discussed gold's strategic role in a portfolio. 

Retail demand is gradually picking up, supported by festivals during the month and ahead of the wedding season. Official imports are expected to pick up during August on the back of improved retail demand.

While the gold price dip may have provided a short-term boost for local gold demand, we believe a sustained recovery requires reviving economic and income growth, fewer disruptions from coronavirus and more weddings. 

Last week we published our updated central bank gold statistics to include data reported for June. This new information shows that central banks added a net 59t to global gold reserves during the month.

James Grant, noted economic expert and Founder and Editor of Grant’s Interest Rate Observer, joined us to share timely insights on key topics. Watch the conversation! 

The domestic gold price declined by 0.7% during June, ending the month at Rs50,809/10g. Retail demand remained muted as the wedding season ended and sowing activity picked up with the onset of the monsoon.

The Shanghai Gold Price Benchmark PM (SHAUPM) in RMB and LBMA Gold Price AM in USD both trended down in June. 

Gold has fallen more than US$100/oz over the past month, with the bulk of the decline occurring over two days last week.

The yen (JPY) has weakened significantly during the first half of 2022: it has registered an 18% depreciation against the US dollar (USD) and now the JPY/USD stands at its lowest point since 1998.

On 30 June, India’s Ministry of Finance notified the industry that basic custom duty (BCD) on gold would increase from 1 July.

The latest update to our central bank holdings data set – capturing data to end-May – is now available. It shows that in May, central banks reported adding a net 35t to global gold reserves.