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Interface News reporter | Liu Ting

Faced with an increasingly complex geopolitical and financial environment, the enthusiasm of global central banks for gold purchases remained unabated in the first half of this year. According to the latest statistics from the World Gold Council, in the first six months of this year, global central banks increased their gold holdings by 483 tons, a year-on-year increase of 5%, setting a record high for the same period in history.

Prior to this, in 2022, global central banks increased their gold holdings by 1,082 tons, a record high. In 2023, central banks of various countries increased their gold reserves by another 1,037 tons, the second highest in history.

The World Gold Council's report shows that in the first half of this year, emerging market central banks are still the main buyers of gold. Among them, the Central Bank of Turkey increased its gold reserves by 45 tons, becoming the largest buyer; the Reserve Bank of India ranked second with a purchase of 37 tons; the Central Bank of China ranked third, increasing its gold holdings by about 30 tons.

The latest data from the People's Bank of China shows that since May, the central bank has stopped increasing its gold holdings for three consecutive months. The latest report shows that as of the end of July, my country's gold reserves were reported at 72.8 million ounces (about 2,264 tons), the same as last month. Before May this year, the People's Bank of China had increased its gold reserves for 18 consecutive months, and in metric terms, it had purchased a total of about 316 tons of gold.

This year, geopolitical issues such as the Middle East war and the US election have been full of twists and turns, highlighting the function of gold as a safe-haven asset. Data from the World Gold Council shows that in July, global gold ETFs attracted $3.7 billion in inflows, a record high since April 2022. This corresponds to the "unprecedented" political situation. For example, in 2024, the Republican candidate for the US President Donald Trump was assassinated and the Democratic candidate Joseph Biden withdrew from the presidential election. Before and after these two days, gold ETFs saw inflows, indicating an increase in safe-haven demand.

Since late July, affected by the yen rate hike and recession trade, global liquidity is tight and gold prices have adjusted, but after the short-term liquidity negatives are digested, gold prices are moving out of the adjustment market. As of press time, London gold has risen by more than 18% since the beginning of the year, and New York Comex gold has risen by nearly 20% so far this year.

Analysts said that in the coming months, against the backdrop of the Federal Reserve's approaching interest rate cut cycle, coupled with factors such as the cooling of the U.S. economy and global geopolitical conflicts, gold prices are expected to continue to fluctuate and rise.

“The market continues to expect the Federal Reserve to start a rate cut cycle.Chicago Mercantile ExchangeAccording to the Federal Reserve Observation Tool, as of August 10, the probability that the Federal Reserve will reduce the federal funds target rate by 25 basis points to 5.00%-5.25% in September this year is 51.0%, and the probability of reducing it by 50 basis points to 4.75%-5.00% is 49.0%. The monetary and financial attributes will continue to push gold prices to fluctuate upward. "GF SecuritiesSaid in the research report.

Ole Hansen, head of commodity strategy at Saxo Bank, also said in a report that he is still optimistic about gold. He emphasized that gold is a diversified hedging tool to resist turmoil in other regions. In addition, if the Federal Reserve opens the window for interest rate cuts in September, interest rate-sensitive investors may return to the gold market through ETFs.

"For gold, the increase in uncertainty and (political) event risks may keep investors interested in it." The World Gold Council said in its latest comment on August 8 that for the US election, the association believes that gold may benefit more from the uncertainty of the election. After the election, investors may turn their attention back to the US government debt and deficit level, which will keep investors' interest in gold high.

CITIC SecuritiesHe said that the trend of gold prices in the short term depends on interest rate cuts, US economic expectations and the impact of the election. After the Fed starts to cut interest rates, the trend of the US economy and the results of the election will determine whether gold can continue to rise. Among a series of factors, the attitude of the central bank towards gold is the most important influencing factor.

The latest survey released by the World Gold Council in June showed that 29% of central banks plan to increase their gold reserves in the next 12 months, the highest level since the survey began in 2018. Only 3% of central banks said they planned to reduce their gold reserves. The survey said that the main motivations for central banks to increase reserves include: the desire to rebalance gold holdings to a more ideal strategic level; to meet domestic gold production needs; and concerns about financial market and inflation risks.

In addition, Wang Qing, chief macro analyst at Orient Securities, said that the Chinese central bank has stopped increasing its gold holdings recently because the current gold price is at a historical high. The central bank's appropriate adjustment of the pace of increase will help control costs. However, he believes that from the perspective of continuously optimizing the international reserve structure and steadily and prudently promoting the internationalization of the RMB, the central bank's increase in gold holdings is still the general direction in the future.