Market Overview

Emerging Markets Are On A Gold Buying Spree

Emerging Markets Are On A Gold Buying Spree

Emerging markets are scooping up gold, and it could be good news for gold prices and investors.

The Numbers

Recent data from The People’s Bank of China indicates China boosted its gold reserves to 60.62 million ounces during the month of March, up from 60.26Moz in February. Over the past four months, China has upped its gold reserves by a total of 42.9 tons.

At the same time, Russia is also beefing up its gold holdings. The World Gold Council reports that Russia bought about 274 tons of gold bullion in 2018 valued at about $11 billion. In February 2019, Russia singlehandedly accounted for 1 million ounces of gold demand, roughly 6 percent of the world’s total demand.

In addition, demand for gold in India is expected to get a boost from the upcoming wedding season. Gold is traditionally a popular wedding gift in India, host to roughly 20 million weddings per year with guest lists commonly in the 3,000- to 6,000-person range.

Gold Demand Drivers

Experts say U.S. dollar weakness is one of the key drivers of gold demand in emerging markets in recent months. In addition, downward revisions to global growth forecasts and increasingly dovish central banks is creating demand for risk-averse asset classes.

“The recent revision of the global growth forecast to 3.5 per cent, from 3.7 per cent, by IMF further made investors watch out for the yellow metal and other risk investment assets,” Vinod Jayakumar of Karvy Commodities recently said.

For investors in gold ETFs such as the SPDR Gold ETF (NYSE: GLD), emerging market investments could help drive prices even higher. The price of gold is up 5.2 percent in the past six months to $1,276, but Goldman Sachs recently forecast that gold prices will hit $1,450 within the next year.

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