Gold Prices Poised for Further Rally Amid Central Bank Purchases

Gold prices have rebounded after adjusting from their peak at the beginning of the year. According to Shinhan Investment & Securities, gold prices rose nearly $6,000 on January 29, then fell to the $4,000 mark on June 11, and recovered to $4,700 on August 25.

The analysts say that the rise in gold prices despite the recent rise in long-term interest rates is due to a change in the nature of the rate hike. If the US long-term interest rate hike stems from the expansion of the term premium due to fiscal instability rather than the expectation of a policy rate hike, it means that the risk of holding bonds has increased, which could stimulate demand for gold.

The central bank's purchase of gold is also cited as a structural upward factor. In the second quarter of this year, the world's central banks' net gold purchase amounted to 289 tons, up 62% from the same period last year, the highest on record in the second quarter. The People's Bank of China continued its net purchase for the 20th consecutive month.