Central Banks a Catalyst for $2,100/oz Gold – TDS

Analysts from Toronto-Dominion Securities (TDS) are out with a research note highlighting how healthy demand for Gold coupled with a future dovish twist from the Federal Reserve could see future Gold prices heading over $2,000 per ounce.

Early data on central bank gold purchases show that buying activity continued to be robust in September.

China once again has been on the forefront of central bank buying activity last month, by maintaining its record-setting pace set throughout the year. This, along with the eventual Fed pivot away from a hawkish stance, suggests gold is set to rally into the $2,100s.

Reporting shows that the People's Bank of China has purchased 26t last month, which lifted their reported 2023 buying to 181t... Since it started its aggressive buying last November, the PBoC has increased its gold reserves by 243t, and the precious metal now represents over 4% of its total foreign reserves. China’s official gold reserves now total 2,192t.

India’s central bank also made a big play in the gold market last month, with its largest single purchase in 15 months.

Central bank buying is likely why the recent higher interest rate-driven gold selloff, did not go through key supports slightly above $1,800/oz. 

We believe the official sector will continue to be supportive in the months to come and should be a catalyst for our $2,100/oz projection next year. These physical purchases will be very important when the Fed pivots to a less restrictive policy... The US central bank should pivot even as inflation is above target.