Gold-tinted glasses - record gold prices, central bank reserves and the miners
Originally posted to northernminer.com
This week’s episode features CPM Group managing partner Jeffrey Christian in conversation with host Adrian Pocobelli on the red-hot gold market. Christian explains his views on the main causes behind the recent sharp rise in gold prices and shares his thoughts on the relationship between interest rates and the gold price. He also delves into central bank reserves, mining supply, and all-in sustaining costs (AISCs).
Topics Discussed
Surge in Gold Prices: A rapid increase in gold prices, reaching record highs, was anticipated but has occurred faster than expected. This rise is attributed to stronger investment demand, driven by economic uncertainty, geopolitical concerns, and a desire to diversify away from riskier assets like stocks and corporate bonds. The strong performance of both gold and the US dollar reflects investors’ preference for safer assets amidst uncertainty.
Central Bank Gold Buying: Central banks have been net buyers of gold for several years. While a substantial portion of gold buying in 2023 came from the People’s Bank of China, CPM anticipates that central bank purchases will continue but may decrease compared to the peak observed when surplus gold was available in the Chinese market at lower prices.
Gold Supply and Mining Costs: The growth in gold mining production, driven by technological advancements and the industrial revolution, has lead to a strong increase in production over time. However, the industry faces challenges from increased regulatory and social pressures, leading to higher all-in sustaining costs. Despite these challenges there is still significant potential for gold mining.
- Debt and Economic Outlook: While debt remains at high levels, these concerns are often overstated and that the financial system is structured in a way that can manage these problems.