By Ashitha Shivaprasad and Brijesh Patel
SINGAPORE (Reuters) – Demand for gold in Asia is surging despite prices hovering near the record highs it hit in May, industry officials say, as buyers snap up the metal to hedge against geopolitical and economic uncertainty.
Spot gold is trading a little over $2,300 per ounce, up about 12% year-to-date and only about 6% shy of the record high it hit last month.
Increased Demand in Asia
Lower confidence in other investment options, such as real estate and equities, is also a factor behind the demand for gold, analysts say. Amidst geopolitical tensions and economic instability, gold is seen as a safe-haven asset that provides stability in uncertain times.
“When the macro-economic backdrop returns to normal, when real estate and equities are more interesting, I think that price sensitivity will return,” Ruth Crowell, chief executive of the London Bullion Market Association, told Reuters.
Diverse Market Trends
In Japan, there are more gold bulls than bears despite record high prices, according to Bruce Ikemizu, chief director of the Japan Bullion Market Association. This indicates a strong belief in the long-term value of gold as an investment.
Chinese investors grappling with currency devaluation, a protracted real estate downturn and trade tensions are also finding value in gold, experts said. China’s purchases of gold coins and bars surged 27% in the first quarter of this year, showcasing the growing interest in gold as a secure asset.
Varied Responses in Different Countries
Elsewhere in Asia, retail investors have been pouring money into the safe-haven asset, with the metal finding increased acceptance among younger buyers, showing a shift in demographics of gold investors.
In Thailand, there were queues outside gold stores as soon as there were headlines on higher prices, indicating a strong demand for gold among the population. Vietnam is also experiencing a similar trend with investors flocking to stock up on gold despite high premiums.
On the other hand, India and Australia remain sensitive to high prices. Indian gold prices have traded at a discount to international prices for five straight weeks, reflecting tepid demand in the second largest bullion consumer, while the Perth Mint’s gold product sales in May fell 30% on a monthly basis.
Future Outlook
India’s gold imports in 2024 are expected to fall by nearly a fifth, as record high prices have pushed retail consumers to exchange old jewellery for new items instead of buying afresh, highlighting the impact of price sensitivity on consumer behavior.
Despite the high prices, the trend of increased demand for gold in Asia shows the enduring appeal of the precious metal as a reliable investment option in uncertain times.
(Reporting by Ashitha Shivaprasad and Brijesh Patel in Bengaluru; Editing by Mark Potter)
