For about five weeks now, the price of gold has been fluctuating between $2,300 and $2,400 per ounce. According to commodity analysts at BCA Research, the ongoing consolidation might just be the calm before the storm. They have recently reaffirmed their long-term positive outlook for the precious metal.
While the price might temporarily dip further as the upward momentum wanes, the downside potential is limited, explained Roukaya Ibrahim, a market strategist at BCA.
“The increased interest in gold from central banks in emerging markets is a structural phenomenon. This demand will continue to provide support and put a floor under the price,” Ibrahim wrote.
Despite the global demand for gold from central banks, BCA remains focused on China. Even though the country did not purchase any gold in May, Ibrahim stated that the People’s Bank of China will continue to build its gold reserves.
“The decline in gold purchases by the Chinese central bank shows that their demand is sensitive to high prices,” Ibrahim wrote. “Nevertheless, the heightened interest of the PBoC in gold represents a structural and multi-year shift in demand. The reason for the Chinese central bank’s increased interest in gold remains. The geopolitical rivalry between the US and China will escalate further in the coming years. China will continue to seek ways to reduce its vulnerability to global systems dominated by the US.”
The demand from the Chinese central bank—and others—will play a crucial role in the future price development of gold. Like BCA, DER AKTIONÄR expects further purchases from the Far East in the mid-term, which will likely lead to higher precious metal prices.