Core Insights - The People's Bank of China has increased its gold holdings for the 10th consecutive month, continuing its strategy to diversify its dollar-dominated reserve assets [1] - In August, China's gold reserves rose by 60,000 troy ounces to 74.02 million troy ounces, with a total increase of 1.22 million troy ounces since November of the previous year [1] - Gold prices have recently reached new highs, breaking a months-long stability, driven by bets on U.S. interest rate cuts and criticism of the Federal Reserve from the White House [1] - Year-to-date, gold prices have surged over 30%, exceeding $3,500 per ounce, with Goldman Sachs suggesting that any damage to the Federal Reserve's independence could push gold prices close to $5,000 [1] - Globally, while the pace of gold accumulation by central banks has slowed, geopolitical risks are expected to continue supporting official sector demand according to a recent report by the World Gold Council [1]

Core Insights - The central bank has increased its gold reserves for six consecutive months, indicating a strategic shift towards gold accumulation [1] - According to the chief economist of JLL Greater China, the current proportion of gold reserves in China's total reserves is still low, suggesting room for further increases in gold holdings [1] - Factors such as financial security and the diversification of reserve assets are driving the need for continued gold accumulation in China [1]

Group 1 - Goldman Sachs indicates that as central banks seek to diversify their reserve assets and reduce reliance on the US dollar, the Korean won, Singapore dollar, and Chinese yuan are likely to be the biggest beneficiaries in Asia [1] - The report highlights that despite the US dollar and euro remaining primary reserve assets, central banks are expected to increase their allocation to Asian currencies [1] - The Korean won is expected to gain traction as South Korea is likely to be included in the FTSE World Government Bond Index (WGBI) next year, leading to increased global central bank holdings of Korean bonds and thus more demand for the won [1] - The Singapore dollar is favored due to Singapore's AAA rating, stable financial markets, and transparent trading environment, making it attractive for central bank investments [1] - The Chinese yuan benefits from China's position as one of the largest trading nations, providing it with a natural liquidity advantage and making it a "logical candidate" for increased use [1] Group 2 - The trend of "de-dollarization" began in 2022 following the US freezing of Russian dollar reserves amid the Russia-Ukraine conflict, raising concerns among global central banks about the safety of holding US dollars [2] - Uncertainties surrounding potential Trump re-election and fluctuating US fiscal and trade policies have eroded foreign confidence in US assets, contributing to a shift in market sentiment [2] - The Bloomberg Dollar Index has declined over 7% since its peak in February, while gold purchases have reached record highs, indicating a movement towards diversifying reserve currencies [2] - Goldman Sachs estimates that the US dollar is overvalued by approximately 17%, predicting a rotation of global assets towards alternatives, including Asian assets [2]

Core Viewpoint - The global demand for gold is projected to reach a record high of 4,974 tons in 2024, driven primarily by central bank purchases and investment demand, despite a slight decrease in central bank purchases compared to previous years [2][5]. Group 1: Central Bank Purchases - Since 2022, central bank gold purchases have significantly increased, primarily led by emerging market central banks, with purchases doubling from around 500 tons to over 1,000 tons, contributing to a rise in gold prices [4][5]. - The increase in gold purchases is not uniform across all central banks; emerging markets like Poland, Turkey, China, Egypt, and India have been the main buyers, while some developed countries have sold gold [7]. - In 2024, central bank purchases are expected to slightly decrease but remain above 1,000 tons, influenced by various factors including market conditions and gold prices [8][16]. Group 2: Investment Demand - Gold investment demand is negatively correlated with U.S. real interest rates; lower real rates typically lead to higher investment in gold [9][10]. - After a peak in 2020, gold investment demand fell significantly due to rising real interest rates, but is expected to see a slight rebound in 2024 as the Federal Reserve signals a shift towards lower rates [13][18]. - Investment demand varies by region, with Asian markets showing net inflows into gold ETFs, while European and North American markets have experienced outflows [14]. Group 3: Future Outlook - Central bank purchases may slow down in the short term but are expected to remain in a long-term net buying cycle, influenced by geopolitical risks and market conditions [16][17]. - Investment demand is unlikely to see a significant rebound due to potential inflationary pressures from U.S. policies and high gold prices, which may suppress demand [18][19]. - Overall, while gold demand may not exceed 2024 levels, it is expected to remain high, with prices experiencing volatility but maintaining a long-term bullish trend [20][21].