(Reuters) – Chinese gold demand is now cyclically soft due to price sensitivity and recent price surges, but emerging-market central banks, including China’s, are likely to continue to buy gold frequently, whether disclosed or not, Goldman Sachs said.
Earlier this month, official data showed that China’s central bank in June refrained from gold purchases to its reserves for a second consecutive month.
Goldman Sachs analysts said in a note that the Chinese market is particularly price-sensitive and they expect that a 10% drop in the Shanghai gold price would boost physical China gold demand by 16%.
Safe-haven demand, driven by geopolitical and economic uncertainty, as well as persistent central bank buying contributed to a rally in gold from March to July, taking spot prices to a record high of $2,483.60 on July 17. [GOL/]
“Although the recent price surge is weighing on cyclical demand, structural changes leave China’s structural gold demand roughly intact on net because the demand boost from lower confidence and lower interest rates roughly offsets the hit from lower trend GDP growth,” Goldman said.
The bank expects significant value in long gold positions, and reiterates its $2,700 per ounce forecast for 2025 owing to firm central purchases, potential U.S. interest rate cuts and geopolitical tensions.
However, “our finding that the particularly price sensitive Chinese market is digesting the price rally points to some risk that gold reaches our $2,700 target later than our 2024 year-end baseline,” Goldman noted.
(Reporting by Anushree Mukherjee and Brijesh Patel in Bengaluru; Editing by Matthew Lewis)
