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Gold: This factor could weigh on the bull market and drive prices down

Published 2024/06/10, 21:10
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Investing.com – Gold futures have surged in recent months, but one factor could hinder further appreciation, at least in the short term: China's purchases, which had been "filling up the cart" recently. Last Friday, the Asian giant reported that it did not increase its reserves of the commodity last month, bringing uncertainties about whether this pause will continue in the coming months and whether it might affect the rally of the yellow metal.

An analyst from the Swiss group Julius Baer highlighted in a report released to clients and the market on Monday that if China continues not to report purchases in the coming months, this factor "could weigh on the very optimistic sentiment in the gold market, leading more speculators to adjust their positions."

Carsten Menke, head of next-generation research at Julius Baer, considers the situation a "temporary setback," given the "strong conviction about persistently strong purchases by central banks and a greater willingness to pay for gold, which is driven by political rather than economic factors."

Julius Baer also warns that China has not been transparent or consistent about this topic in the past, and with increasing geopolitical tensions with the United States, the People's Bank of China (PBoC) is likely to return at some point to increasing its gold reserves to reduce dependence on the U.S. dollar.

"Despite its large-scale purchases, China's percentage of gold in its monetary reserves remains below 5%. This compares to a global average of more than 15% and still leaves a significant advantage when measured in tons of gold," concludes Julius Baer, recalling that in other buying sprees, this market has already shown sensitivity to prices previously.

Gold futures for August delivery are up 0.18% at $2,329.10 at 3 p.m. ET.

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