Gold prices, according to the WGC report, averaged $1481/oz (Rs 33,912/10 gram) in Q4, up 20.76 per cent in dollar terms and 19.1 per cent in rupee terms on a y-o-y basis.
“This was the highest average price since Q1-2013. Although the price remained below the Q3 high, it was well supported. And gold priced in various currencies – including euros, Indian rupees and Turkish lira – hit their highest levels in history,” WGC said.
Global reserves grew by 650.3 tonnes (-1 per cent y-o-y), the second highest annual total for 50 years. Gold buying in Q4 of 109.6 tonnes was 34 per cent lower y-o-y, although this was partly a reflection of the sheer scale of buying in 2018.
“Global demand in the second half (H2) was down 10 per cent compared to the same period of 2018 as y-o-y losses in Q4 compounded those from Q3, notably in jewellery demand and retail bar and coin investment. The annual supply of gold increased 2 per cent to 4,776.1 tonnes. This growth came purely from recycling and hedging, as mine production slipped 1 per cent to 3,436.7 tonnes,” the WGC report says.
While bar and coin investors were more inclined to capitalise on the price rise by selling existing holdings or waiting for the price to find a steadier footing, positioning in US futures turned sharply bullish in June as the Federal Reserve began to ease rates. This bullish sentiment among professional investors, WGC says, contributed to the price rise, which in turn attracted further momentum-driven investment inflows, notably into ETFs.
More headroom for prices
Despite the sharp rise in prices, analysts still see more headroom for the yellow metal in the years ahead. Geopolitical developments, soft economic climate globally and the central bank policies, they believe, will keep gold prices relatively firm going ahead.
“The main reason to have a structural investment in gold is not to hedge the risk of rising geopolitical tensions but rather to bet on the view that G7 central banks will not be able to normalise monetary policy,” wrote Christopher Wood, global head of equity strategy at Jefferies in his recent note to investors. In his Asia ex-Japan long-only portfolio, Wood has allocated 50 per cent to gold bullion, 20 per cent is held in unhedged gold-mining stocks and the balance 30 per cent in Asia ex-Japan equities.