Gold's Pause May Not Last

Gold's rally has stalled due to uncertainty over Federal Reserve policy and the disruption caused by the US-Iran conflict, but it's not a reversal of the bull market, according to Tony Kim, global head of metals trading at Goldman Sachs.

Kim describes the current weakness as an 'elongated pause' rather than a change in the longer-term cycle. The uncertainty over Federal Reserve policy under new chair Kevin Warsh and the US-Iran conflict have complicated the outlook.

Central banks, however, are buying more gold than they did before the Russia-Ukraine war, with 2022 marking an important turning point. Global mines produce roughly 3,500 tonnes of gold a year, and before the Russia-Ukraine war, central banks bought around 400 to 500 tonnes annually.

They are now buying closer to 1,000 to 1,100 tonnes, which means a much larger share of annual gold production is being absorbed by central banks, leaving a smaller quantity available for jewellery, ETFs, bars, and physical investment.