Gold Is Ready To Test New Highs

Gold has recently managed to settle above the $2400 level and is moving towards the $2450 level. Interestingly, the usual suspect – China’s central bank –  did not buy gold for the second month in a row. At the end of June, China held 72.8 million ounces of gold.

While the country’s central bank was waiting for a pullback, other investors have used the opportunity to buy gold at lower prices, pushing gold back above the $2400 level.

World Gold Council data shows that physically-backed gold ETFs enjoyed monthly inflows of $1.4 billion in June. Year-to-date, such ETFs lost $6.7 billion as investors were moving money out of gold ETFs at the start of the year.

Data shows that speculative investors have started to buy gold ETFs at a time when the more conservative China’s central bank stopped its purchases due to high prices.

At this point, the key question is whether China’s central bank will start buying again in the upcoming months. The central bank missed the opportunity to purchase gold near the $2300 level, so it may be forced to buy more gold at higher prices in order to diversify its reserves amid rising tensions in U.S. – China relations.

A recent central bank survey published by World Gold Council shows that the percentage of central banks that believe that dollar’s share of total reserves would be ‘significantly lower’ five years from now has increased from 5% in 2023 to 13% in 2024.

As many as 66% of respondents believe that the share of gold in total reserves would be ‘moderately higher’ five years from now.

Most likely, speculative investors would like to benefit from this long-term trend, so inflows into gold ETFs would continue to grow. Meanwhile, the upcoming beginning of the Fed rate cut cycle should provide additional support to gold markets and push gold above the $2500 level.

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