Gold prices reach record highs due to increased demand from China and young investors

From Morningstar: 2024-05-08 07:33:00

The spot price of gold hit an all-time high last month at $2,431 per ounce, now hovering around $2,300, still historically high with a 25% yield over seven months. Ned Naylor-Leyland of Jupiter AM Gold & Silver fund believes factors beyond Fed policy are driving this uptrend, including increased demand from China and the Middle East.

China emerged as a significant global gold buyer, with 2023 gold consumption up 8.73% YoY at nearly 1,090 tonnes. Younger buyers aged 25-34 are increasingly purchasing gold in China, relying on one-gram gold grains for long-term wealth preservation. Gold investments seem attractive to younger investors amidst declining stock and property markets, but the US may require a significant drop in real interest rates for the asset to shine.

The value of physical gold has soared, yet gold mining companies’ share prices have lagged. While physical gold ETFs experienced modest gains of 17.7%, gold producer ETFs have only seen a 2.5% increase in the past year. However, recent months show a positive shift with physical gold ETFs up 14.4% and gold mining ETFs up 20.4%.

Gold mining stocks have begun catching up with gold prices after years of undervaluation, marking a potential turnaround for the sector. Outperformance demands fundamental positioning and strategy translating rising gold prices into cash flow. Companies seeking growth may need to acquire assets or companies to expand reserves. Organic growth poses challenges, necessitating strategic planning for sustained growth potential.



Read more at Morningstar: How to Invest in Gold Right Now