With very little mining and modest levels of recycling, India is heavily reliant on bullion imports to meet its domestic demand. Indian official imports have continued to grow despite high import duty with official imports averaging 760t over the last decade.
Gold-backed ETFs (gold ETFs) experienced net inflows of 13.6 tonnes (t) (US$838mn, 0.4% AUM) in November, the first month of positive flows since July. Inflows into North America and Europe well exceeded outflows from Asia, which saw negative flows for the first time since May. Global gold ETF holdings rebounded from year-to-date lows, increasing to 3,578t (US$208bn) as investment demand for larger gold ETFs returned amid decades-high inflation and heightened market volatility.
Gold rose 2% in November based on the LBMA reference price, rallying early in the month before giving up most of those gains in the following weeks.
Gold has long been valued for its distinctive investment benefits. Although gold is no longer the basis of the international monetary system, its status as a bastion of stability has endured, a role which has become ever more important in today’s uncertain environment.
Together with our partners at OMFIF, we have written a report on the development of central bank digital currencies (CBDCs) and the implications for the gold market. CBDCs can potentially enable a wide range of new features. Money can become programmable, allowing policymakers to incentivise certain spending behaviours that can optimise economic impact or address social concerns. The trackable nature of CBDCs can also help to deter financial crimes. The ability to easily deploy “helicopter money” may also spark concerns about inflation.
Gold rose slightly in October, despite a risk-on environment and increases in short-term bond yields
Gold-backed ETFs (gold ETFs) experienced net outflows of 25.5 tonnes (t) (-US$1.4bn, -0.7% AUM) in October. Outflows of near equal magnitude from Europe and North America were marginally offset by inflows in Asia.
Q3 gold demand down 7% to 831t
ETF outflows outweighed continued recovery in other sectors
Fuelled by the COVID-19 pandemic, Australia’s already declining cash target rate dropped to 0.1% in 2020, the lowest since 1990. This led to a reduction in Australian superannuation fund allocations to cash and bonds and an increase in risk-on assets, such as equities, in the hunt for returns. But will this move help achieve their desired returns at reasonable risk levels?