Gold: Price dip seen limited as PBoC buying continues – Commerzbank

Commerzbank’s Carsten Fritsch notes Gold fell to USD 4,120 per ounce after fresh Iranian attacks lifted TTF gas and Oil prices, but Fed rate expectations remain unchanged. He argues downside is limited, as the People’s Bank of China has bought Gold for 20 straight months, recently accelerating purchases and adding 33 tons over the last three months on the lower price environment.

Chinese demand cushions recent weakness

"The price of gold fell to USD 4,120 per troy ounce this morning following Iranian attacks on two cargo ships and an LNG tanker in the Strait of Hormuz. As a result, the TTF natural gas price rose significantly, and oil prices also edged up slightly, fueling inflation concerns."

"However, there was no change in Fed rate hike expectations. The market continues to anticipate interest rate hikes by the Fed of around 30 basis points by the end of the year. As a result, the price decline is unlikely to continue much further."

"The People’s Bank of China (PBoC) purchased gold in June for the 20th consecutive month. Gold reserves rose by 480 thousand ounces, or nearly 15 tons last month, according to the central bank. These are the largest monthly purchases since October 2023."

"Gold purchases over the past 20 months total more than 80 tons - or just over 4 tons per month. However, purchases have recently picked up noticeably. In the last three months alone, they totaled 33 tons."

"Apparently, the lower price level has prompted the PBoC to step up its purchases."