Central Bank Buying Boosts Gold's Structural Bid

Gold's recent pullback has led to questions about the bull market's strength, but according to Tony Kim, Goldman Sachs' global head of metals trading, this is merely a pause in the rally.

Kim believes that sovereign and institutional demand have changed the market's underlying ownership structure, with official-sector buying absorbing supply from circulation and creating a tighter pool for other buyers.

Central banks once purchased around 400-500 tonnes of gold annually, but this figure is now closer to 1,000-1,100 tonnes, according to Kim. This increased demand has led to a decrease in the available supply, making gold more attractive to investors.

Kim sees a bid beneath the market, with meaningful sovereign and institutional support closer to $4,000/oz. He believes that this level will become a strong centre of gravity for institutional buyers as they diversify their reserves and reduce exposure to assets that can be politically frozen.