The report says that the total supply of gold increased by 1,215.2 tons, up 1% from last year. At the same time, the supply of recycled gold amounted to 275.8, representing a drop of 6% compared to last year. Global demand for gold was 19% above its five-year average of 1,039 tons in the first quarter. Rich said he expects gold prices to remain volatile in the coming quarters, as investors judge whether geopolitical tensions will continue and whether the Federal Reserve's actions to combat inflation will succeed.
This volatility has led to an increased interest in Gold IRAs as a way to protect investments and hedge against inflation. The Federal Reserve raised interest rates by a quarter of a point in March in the hope of cooling consumer prices, and analysts expect a half-point rise in May. If inflation is controlled, this is likely to be bad news for gold prices, that is, unless rising rates cause a recession. Gold tends to perform well during recessions, data from the Bureau of Labor Statistics shows, as investors turn to physical assets to protect their wealth. In recent months, several major investment banks and Wall Street titans have also sounded the alarm about the possibility of a recession in the United States.
UU. Deutsche Bank economists, led by research director David Folkerts-Landau, even predicted this week that there could be a “big recession” in the US economy, arguing that the Federal Reserve is “way behind the curve” when it comes to fighting inflation. Gold mining is a global business with operations on all continents, except Antarctica, and gold is extracted from mines of a wide variety of types and scales. In other words, a stronger increase in the supply of recycled gold in a bull market will undoubtedly result in a further reduction in demand for gold by central banks.
So how does the demand for physical gold react to the price of gold? Globally, a quarterly increase of 1% in the price of gold leads to a similar increase in demand. On the supply side, an increase in the price of gold generally involves a slight reduction in mining supply, as well as a fairly marked increase in the supply of recycled gold. India was relatively unaffected by the pandemic during the quarter and saw an increase in recycling volumes caused by the strong price of gold, thanks to some defaults on gold loans and pawn shop sales. In addition, our economic models suggest that changes in the price of gold have an immediate but temporary effect on recycling and that the rise in gold prices this year seems to have caused an increase in sales, although it is likely that economic difficulties in some markets have also played a role.
Finally, an interesting conclusion is that gold sellers are willing to sell their gold without necessarily considering the price. Similarly, the supply of gold will have a very different impact on the price of gold, depending on whether it is an increase in the quantities of gold mined or the resale of physical gold. In this sense, a long-term increase in the price of gold is only possible if mining production costs increase, if the holders of gold maintain it permanently, or if the demand for investments increases. Beyond the structure of supply and demand for gold, it is important to relate the evolution of supply and demand to the price of gold.
The supply of scrap gold is expected to decline at an average annual rate of 4.6% over the forecast period, to 888 tons in 2027, as the fall in gold prices discourages the sale of gold in major jewelry consumer markets, such as China and India. However, DISER noted that the continuation of strict environmental regulations and the consolidation of the industry will cause gold production in China, the world's largest gold producer, to fall during the prospective period. In addition, the rise in gold prices and the weakness of local currencies brought the domestic price of gold to historic highs, which had a negative impact on demand for jewelry. .