Market update

The traditional Defined Contribution (DC) investment portfolio made up of equities and bonds has worked well for investors for a long time. For much of the last 15 years, the environment that has afforded this success has been driven by central bank actions such as ultra-low interest rates and quantitative easing.

We believe that mandatory hallmarking will be positive for India’s gold market, improving transparency and giving consumers more confidence in the purity of the gold they buy. 

The Indian government’s sustained campaign for improving overall tax compliance through a carrot-and-stick policy was reflected again in the 2021-22 Union Budget, with a few material announcements that impact gold. 

Primarily driven by the COVID-19 pandemic and its far-reaching impacts, China’s gold demand in 2020 declined by 27% compared to 2019, the lowest recorded demand in a decade.

2020 has been a memorable year for China’s economy and its gold market.

Demand for gold loans, both through banks and non-banking financial companies (NBFCs) has grown in response to the economic impact of the COVID-19 pandemic. 

China’s physical gold investment market has come a long way since its liberalisation in 2004. Primarily driven by the strong economy, retail physical gold investment demand in mainland China has surged by nearly 17 times in the past 16 years, accounting for nearly one third of the world’s total annual bar and coin demand in 2019.

India has embraced online retailing across different categories. Digital and social activity plays an increasingly important part in the purchase journey for gold. 

The gold supply chain is truly global. Gold is mined on every continent except Antarctica, refined into bars and coins in numerous countries, and distributed far and wide. This geographical dispersion not only brings stability to the gold market, it is also necessary to satisfy demand.

Central bank reserves are typically constructed according to three guiding principles: safety, liquidity and return. The Covid-19 pandemic has reinforced the significance of these principles and, by extension, the importance of smart and sustainable reserve management.