Last
month
the
spot
price
of
gold
reached
an
all-time
high
at
$2,431
an
ounce.
Since
then,
the
value
of
bullion
has
fallen
slightly
to
around
$2,300,
a
range
that
is
still
historically
high,
yielding
about
25%
over
the
past
seven
months.
“Gold
has
already
metabolised
the
Federal
Reserve’s
expected
downsizing
of
its
monetary
policy
easing
outlook
for
2024,
yet
it
is
continuing
its
upward
trajectory,”
explained
Ned
Naylor-Leyland,
manager
of
Jupiter
AM
Gold
&
Silver
fund.
“This
suggests
that
other
factors
are
at
play,
such
as
the
return
of
significant
demand
for
physical
gold,
particularly
from
China
and
the
Middle
East.
This
wave
of
physical
buying
could
be
driven
by
a
confluence
of
reasons,
including
inflationary
concerns
and
rising
geopolitical
tensions
in
the
Middle
East.”
Curiously, $15.6
billion
of
client
funds
flowed
out
of precious
metals
exchange-traded
funds
(ETCs)
over
the
past
year,
most
recently
at
a
monthly
all-time-high
rate
in
April.
Amid
such
profit-taking,
those
investment
vehicles
clearly
aren’t
the
drivers
of
globally
elevated
gold
prices.
Who
is
Buying
All
this
Gold?
China
has
become
one
of
the
most
important
gold
buyers
in
the
world.
The
China
Gold
Association
(CGA)
reported
that
the
country’s
gold
consumption
in
2023
amounted
to
almost
1,090
tonnes,
an
increase
of
8.73%
year-on-year.
Another
indicator
of
overall
gold
demand
in
China,
the
Shanghai
Gold
Exchange
(SGE),
reported
a
95%
year-on-year
increase
in
demand
in
January
2024.
“Behind
the
record
demand
from
China,
an
interesting
demographic
shift
is
taking
place,”
Ned
Naylor-Leyland
continued
in
his
April
30
report.
“Younger
buyers,
aged
25-34,
have
increased
their
share
of
total
gold
purchases
from
16%
to
59%
in
2023.
The
decline
in
the
stock
market
and
local
property
values
has
contributed
to
the
rise
of
the
younger
generation,
but
it
is
the
form
of
investment
that
indicates
the
true
nature
of
the
demographic
shift.
Younger
buyers
in
China
are
choosing
to
buy
one-gram
gold
grains
to
preserve
wealth
for
the
long
term.”
Such
high
demand
may
be
confined
to
Asia
for
longer.
According
to co-founder
of
Flossbach
von
Storch Bert
Flossbach,
in
the
US,
“the
real
interest
rate
on
inflation-linked
bonds
is
+2%
and
would
have
to
fall
significantly
to
make
gold
attractive
again
to
US
investors
as
an
inflation
hedge.”
On
April
22,
Flossbach
wrote
that
“it
is
not
possible
to
make
serious
predictions
about
the
gold
price.
Over
the
past
ten
years,
investors
have
enjoyed
an
annual
increase
in
the
gold
price
of
more
than
8%
in
euro
terms.
Looking
ahead,
we
should
not
expect
another
similar
growth.
For
us,
gold
investments
are
not
focused
on
yield,
but
on
their
insurance
character
as
part
of
a
diversified
investment
strategy.”
Is
it
Time
to
Invest
in
Gold
Stocks?
While
the
value
of
physical
gold
has
rallied
strongly,
the
share
prices
of
companies
that
mine
and
market
it
have
been
slow
to
follow.
A
simple
comparison
of
two
ETFs
from
the
same
fund
house
exposed
to
these
two
asset
classes,
the
iShares
Physical
Gold
ETC
and
the
iShares
Gold
Producers
ETF,
makes
this
gap
clear:
over
the
past
year,
the
former
gained
17.7%,
while
the
latter
gained
only
2.5%.
On
the
other
hand,
something
seems
to
have
changed
in
the
past
three
months,
with
the
iShares
ETC
on
physical
gold
up
14.4%
and
the
ETF
on
gold
mining
company
stocks
up
20.4%.
Mining
stocks
can
rise
significantly
when
gold
goes
up,
but
this
is
not
always
the
case.
Traditionally,
mining
stocks
are
more
volatile
and
amplify
the
movements
of
physical
gold
prices–
their
correlation
is
only
visible
in
the
long
term.
Gold
Stocks
Catch
Up
With
Gold
Prices
“After
years
of
being
undervalued
against
the
yellow
metal,
the
NYSE
Arca
Gold
Miners
index
and
the
MVIS
Global
Juniors
Gold
Miners
index
have
significantly
outperformed
gold
since
March.
This
could
mark
the
beginning
of
a
long-awaited
turnaround
for
gold
mining
stocks,”
said
Imaru
Casanova,
gold
and
precious
metals
portfolio
manager
at
VanEck.
“Outperformers
in
the
sector
must
also
demonstrate
fundamental
positioning
and
a
solid
strategy
that
translates
rising
gold
prices
into
improved
cash
flow
and
higher
returns,
which
will
enable
growth,”
Casanova
continued
in
his
note
published
on
April
30.
“Organic
growth
is
not
easy
in
the
gold
sector.
Searching
for
new
gold
deposits
or
defining/expanding
existing
ones
is
a
difficult,
lengthy
and
capital-intensive
process.
To
significantly
expand
their
base
of
reserves
and
depleting
resources,
companies
generally
need
to
acquire
other
companies
or
assets.
All
things
being
equal,
the
more
advanced
a
project
is,
the
higher
its
valuation
and
the
faster
the
company
grows.”
This
story
was
originally
published
in
Italian
on
6
May
2024
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