China gold imports fall

Meanwhile, China’s gold imports fell in June but ended the first half of the year with a year-on-year rise. In June, gold imports totalled 98 tonnes, 50 tonnes lower than in May, according to data from the World Gold Council. However, the month-on-month drop may have been driven by a low local gold price premium, disincentivising importers. The second quarter is also usually an off-season for gold demand in China.

This brings China’s first half of the year gold imports to 792 tonnes, a pickup of 400 tonnes compared with the first half of 2022, according to the World Gold Council data. However, measures released by Beijing over the last couple of weeks to stimulate the flagging economy could benefit gold consumption in the country.

US Fed policy remains key theme for gold

The future direction of Fed policy will remain a central theme for gold prices for the months ahead. We believe the downside remains limited for prices as the Fed is close to the end of its monetary tightening cycle.

Rising interest rates have been a significant headwind for gold for more than two years now. 

September appears set for a pause given recent encouraging signals on inflation and labour costs, but robust activity data mean the door remains ajar for a further potential hike. Markets see a 50-50 chance of a final hike while our US economist believes that rates have most probably peaked.

We see gold prices moving higher towards the end of the year, given the Fed should start to cut rates in the first quarter of 2024, while geopolitical tensions and macroeconomic uncertainties will also provide headwinds for gold prices going forward.

We forecast prices to average $1,900/oz in the third quarter and $1,950/oz in the fourth. We expect prices to move higher again in the first quarter of 2024 to average $2,000/oz on the assumption that the Fed will start cutting rates in the first quarter of next year.

ING forecast