Gold: Three Major Reasons of the Current Sluggishness

Gold and most other precious metals have been under pressure lately due to several factors. Most importantly, the recent pause in the seemingly endless series of the Fed’s interest rate hikes hinted at its diminishing inflationary pressure, which means not-so-good news for safe havens.

According to Bloomberg, demand for gold in China is starting to slow as the country's economic slowdown takes its toll on the industry. While sales of gold and silver jewelry grew rapidly in early 2023, they rose just 24% YoY in May, the first sign of a cooling this year.

Apart from India, the country is also the largest consumer of physical gold bars, jewelry and coins. Sales were boosted by pent-up demand after the country lifted pandemic restrictions late last year, rising 37% in March and 44% in April.

In India, Centre-backed Sovereign Gold Bond (SGB) scheme’s first tranche for 2023-24 was opened for subscription on June 19. The country's top lender, State Bank of India (SBI), recently tweeted that by investing in SGBs one can get good returns and safety.

The government has pegged the issuance price at Rs 5,926 per gram of gold. The Centre in consultation with the Reserve Bank of India (RBI) has decided to allow a discount of Rs 50 per gram from the issue price to those investors who apply online and the payment is made through digital mode.

The SGBs were launched with the objective to reduce the demand for physical gold and shift a part of the domestic savings, used for the purchase of gold, into financial savings.