After a bumper year in 2019, gold will continue to shine in 2020, says the World Gold Council (WGC). The interplay between market risk and economic growth will drive demand, according to its recent ‘Gold Outlook 2020’ report.
The council released a report on total gold holdings by global central banks recently. It was based on data provided by them on gold buying to the International Monitory Fund (IMF).
The Reserve Bank of India (RBI) bought 7.5 tonnes of gold in October 2019 for adding to its foreign exchange reserves, which swelled to $461 billion, including $28 billion gold.
The RBI now holds 625.2 tonnes of gold or 6.6 per cent of its forex reserves.
In terms of total gold bought in 2019, it is the sixth largest buyer with 25.2 tonnes purchases in the first 10 months of 2019.
China, Russia, Kazakhstan, Turkey, Poland bought more gold than India in 2019. Total gold purchased by central banks from January to November 2019 was 570 tonnes.
WGC said in its latest data analysed for ETFs that, “Gold-backed ETF inflows alongside central bank purchases were a large driver of global gold demand in 2019.”
Tax cuts have to be introduced as a credible incentive to spur economic growth, the report said, highlighting that higher taxes are exacerbating the impact of the record high local gold price on consumption.
The immediate trigger for gold prices is the escalating tensions in the Middle East.
While the introduction of mandatory hallmarking for gold jewellery at the beginning of the year may enhance consumer trust, this potential initial disruption should not be ignored, WGC has said.
A ‘spot exchange’ — when it becomes a reality — is expected to usher in transparency and thereby benefit consumers and small jewellers. Indications are that the gold consumption in India slipped in 2019 as against the level in previous year.