something about gold, from UBS, emphasis from whomever sent me, for easier perusal
QUOTE
Official sector gold buying continues…
Along with demand from key physical markets such as India and China, other fundamental demand categories have likely been supporting the gold market, albeit doing little to determine the broader price trend. Official sector gold purchases so far this year have been stronger than we expected at the beginning of 2021. Available data as of July shows that net buying has amounted to around 360 tonnes or 11.68moz, well on its way to our latest full year estimate of around 400 tonnes of total net buying from the official sector (Figure 1)
. …helped by the emergence of new buyers.
Another interesting development this year has been the emergence of buyers that have previously been less active in the gold space (Figure 2). Brazil has been a buyer of gold from May to July so far, adding a total of 62.3 tonnes of gold to its reserves. It remains to be seen whether Brazil’s purchases would be sustained, similar to other central banks that have implemented gold buying strategies in the past. Another central bank that has recently become active isThailand, which is currently the top buyer for 2021 after adding a total of around 90 tonnes in April and May. The last time Thailand had notable additions to its gold reserves was back in 2011, although the volume then was lower at 52.9 tonnes bought over 4 months throughout the course of year (Figure 3). Other large buyers this year such as Japan and Hungary appeared to be active for only one month this year, adding around 81 tonnes and 63 tonnes, respectively, back in March.
Russia’s gold reserves surprisingly increase in July
Interestingly, Russia added around 3 tonnes in July, the first purchase since June 2020 (Figure 4). This only effectively offsets selling in April for the same amount, and still leaves the net change in Russia’s gold reserves at -3.1 tonnes as of July. Nevertheless, the buying comes as a surprise given the announcement earlier in the year that Russia’s central bank would halt gold purchases. Meanwhile, according to today’s headlines, China’s gold reserves remain unchanged as of end-August – official gold holdings have been flat at 1,948 tonnes or 62.6moz since late 2019. Overall, we expect official sector net purchases of gold to continue for the remainder of the year, but the pace is likely to be slower than in H1 wherein volumes were boosted by seemingly one-off purchases made by some central banks in the first quarter.
Retail physical gold demand has also been a source of support
The other demand category that has likely been helping underpin the gold market is retail consumer interest. US Mint and Pert Mint gold coin sales suggest robust buying this year, the 12-month average of combined monthly sales volumes tracking just under 200koz, which is at the upper end of the range over the past several years (Figure 5). Interestingly, previous observations that we have made show that US Mint coin sales tends to be higher on average during periods when the US President is a Democrat and lower on average during periods when the administration is Republican. US Mint annual average coin sales during the Clinton and Obama administrations was around 871koz; so far this year, total gold coin sales are around 848koz(Figure 6). Germany is another market that has shown strong gold retail consumer interest this year. Average consumer demand over the past 4 quarters is around 42 tonnes, which is at the top end of the range in the past several years. The pick-up in gold interest coincides with the rise in inflation and inflation fears, with gold historically viewed as protection against rising prices (Figure 7).
UNQUOTE
 |
