China On A Gold Buying Spree

 All over the world, economies are improving and stimulus measure is helping to get things back on the growth track. But all this is not as easy as it seems. The main reason behind this recovery is fiscal stimulus. Any dort of stimulus brings along certain pressures - concerned balance site and budget deficit. This further leads to inflation, in fact, currently, we are expecting the nation to create pressure on the U.S. dollar which will further release bullish sentiments for the precious metal.

Although gold prices have struggled in the last seven months, the precious metal still plays an important role in a portfolio. Gold remains to be an attractive safe-haven asset as real interest rates remain near historically low levels.

The precious metal and RSBL coins were seen heading to their second consecutive week of gains after a positive start to Q2 amid a weaker U.S. dollar and retreating U.S. 10-year Treasury yield.

It would be sensible for investors to take some defensives positions in their portfolio because of current valuations. The U.S. economy is expected to see strong economic growth this year. So, fundamentally, equity markets have room to go higher and hence there should be a balanced portfolio allocation.

The growth that we are seeing in equities is being supported by stimulus, earnings and by the recovery of global economies. But this growth won’t come alone, it will definitely bring some volatility along with it. But this volatile situation would be a great opportunity to park investment into portfolio risk hedges like commodities. Some players believe that it is just the right time to jump into the market and make the most of this opportunity and reach out to the top gold dealers in India and the largest bullion dealers in India. 

While talking about portfolio allocation, there is this huge superpower that aims to pile up reserves to the best possible strength. China has cleared the way for a massive surge of gold and gold coin imports into the country. An exclusive report from Reuters suggested about 150 tonnes of gold (worth $8.5 billion at current prices) is likely to be shipped into China following the green light from Beijing. This information was revealed by four different sources that China has permitted domestic and international banks to import large amounts of gold into the country.

China is in the race to build up its reserves. In fact, analysts say that tonnes of gold in China still stands unreported. Of the official numbers, it is believed that in 2019, China's gold imports ran at about $3.5 billion a month, or roughly 75 tonnes.

The report quoting two people said the gold would be shipped in April and the other two said it would arrive over April and May. China brings in the bulk of its gold from South Africa, Switzerland, and Australia. China has, on average, imported gold worth about $600 million a month, or roughly 10 tonnes. The move, cited by the news agency, is "potentially helping to support global gold prices after months of declines."

China is the world's biggest gold consumer, gobbling up hundreds of tonnes of the precious metal worth tens of billions of dollars each year, but its imports plunged as the coronavirus spread and local demand dried up. The main reason behind this purchase is to revive the dampened gold market.

A fair recovery in gold demand this year will require a generally much higher level of gold import. Next week also marks the Federal Reserve media blackout period ahead of its monetary policy announcement on April 28. ING said that no additional Fed speakers could mean a weaker U.S. dollar, which is beneficial for gold. A quieter week for U.S. data and the Fed in the blackout period could favour a continuation of benign market trends and a slightly weaker US and stronger yellow metal. On one hand, we have gradual growth, speedy jab drives and on the other hand, we see a second Covid wave engulfing the world.

Too much happening globally. In this current environment, with so many unknown factors impacting investment strategies, it is advisable for investors to remain actively involved with their portfolios and remain calm and balanced.

Investors Pull Out From Gold And Pool In Other Assets

 Compared to last year, the first quarter wasn’t that interesting for gold. However, the yellow metal showed a decent start to the second quarter. Gold prices were seen moving up around  1.5% last week. It ended close to the $1760 an ounce, we closed for the week. As the week opened, Gold prices fell on Monday, weighed down by firmer U.S. Treasury yields and dollar after better than expected U.S. economic data lifted prospects for higher inflation. Spot gold fell 0.2% to $1,739.20 per ounce.

Stronger than expected data suggests that inflation (will be) picking up faster than expected in months to come, which is leading to a rise in real yields, exerting pressure on gold. If we do get flaming inflation readings next week, it could be a catalyst for higher Treasury yields, which would be bad for gold. But once we pass that event and if gold would still near $1,750, that would be a green light for prices to rise higher. There could be more upside potential for gold after the CPI data.

The gold dealers in India remain optimistic as the gold prices might have already hit their bottom in the first quarter of this year. In that case, we can expect a favourable environment for gold to rose. The Fed removed the big risk as far as yields surging. This will act in favour of the yellow metal. And even though we might not see the August record highs, gold could make a move towards $2,000 again.

We have a line up of data releases this week, which might catch investors attention-

• CPI
• U.S. jobless claims
• Retail sales
• NY Empire State manufacturing index
• Philadelphia Fed manufacturing index
• Industrial production

Other supportive drivers for gold are- 

Stronger physical demand - Since the onset of the pandemic, gold has also seen an uptrend. A few minor drops were witnessed, but overall it has been a green zone gold. High demands amongst the Chinese and Indian coupled with renewed interest from central banks have all delivered sufficient support for the yellow metal.

Piling gold reserves by central banks - With 2021, the gold dealers in India and largest bullion dealers in India expect that the new year will bring a global economic rebound, "The possibility of capital inflows into emerging markets and the low interest-rate environment may lead to central banks adding gold for diversification purposes The breadth of central banks purchasing gold could potentially rise substantially considering the massive increase in sovereign debt and the rapid pace of money supply growth in reserve currency countries. A sustained rise in official interest could provide further support for the yellow metal.

Furthermore, domestically, the top gold dealers in India are expecting that Gold and Silver could become expensive from the current levels on two counts. With the international prices going up, the resurgence of the Coronavirus Pandemic could drift investments towards this haven, resulting in the increasing demand for gold.

However, we still find some players in the market who are pulling out from gold and pooling into equities, cryptos and other asset forms. But as many say that crypto is a bubble and if this bubble pops then it will be a huge and significant game changer for gold. But to be sure, this is technically not possible. All we can say is that if at all the bubble bursts then $2250 an ounce for gold will be a cakewalk.