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By Kisho Kumari Sucedaram
KUALA LUMPUR, Aug 3 -- Consumer demand for gold in the country in the second half of this year would likely be supported by the significant increase in the COVID-19 vaccination rate, said World Gold Council (WGC) regional chief executive officer of APAC (ex-China) Andrew Naylor.
“If the (COVID-19) vaccination coverage increases, we will likely see an economic recovery that is supportive of consumer demand for gold for the rest of the year and on the institutional investment side, inflation expectations will drive institutional interest in gold,” he said in an interview with Bernama recently.
Based on the latest quarterly figures from WGC, the country’s gold market was seen to be recovering in the second quarter of 2021, with jewellery demand being up 26 per cent year-on-year (y-oy), while bar and coin demand was up 92 per cent y-o-y.
Malaysia has administered a total of 20,533,660 doses of COVID-19 vaccination since the National COVID-19 Immunisation Programme (PICK) kicked off on Feb 24.
The number covers 13,816,971 for the first jabs, while 6,716,689 recipients received the second dose completing their vaccination.
According to Naylor, the main factor driving gold demand was economic recovery, which supports consumer and technology demand whereby an approximately seven per cent demand for gold comes from the technology sector.
“Despite outflows at the end of 2020 and in the first quarter this year, interest from institutional investors is increasing and we saw net inflows into gold-backed exchange-traded funds (ETFs) in the second quarter,” he said, adding this was largely driven by medium and long-term inflation expectations.
Elaborating further, he said gold is a strategic investment for several reasons with over US$175 billion (US$1= RM4.22) traded every day, a source of returns and an effective diversifier.
“The unique nature of gold demand means it behaves differently to other asset classes and can be used as a diversifier,” he said.
According to Naylor, many consumers would have taken advantage of the lower gold price, particularly in the first few months of the year, and despite an uptick in COVID-19 cases, Malaysia is still expected to recover this year.
“The impact of lockdowns in Malaysia is mitigated by the increasingly digital nature of the Malaysian economy, some of the first digital gold products were launched in Malaysia,” he said.
Malaysia, he said has been a pioneer in the digital gold space.
“Some of the world’s first digital gold products were launched in Malaysia, allowing consumers to buy and sell physical gold online or through an app, without the need to visit a shop,” he noted.
Whilst the pandemic has brought significant economic uncertainties, he also said economists were projecting that economies would recover to pre-pandemic levels quickly once the vaccination rate improves.
“This will support consumer demand in particular. Governments have had to deploy significant amounts of emergency funding and this is likely to impact inflation in the medium term,” he said.
Hence, this would likely underpin institutional investment demand for gold,” he said.
Furthermore, he said gold was a safe haven, which has been one of the reasons for becoming the best performing asset classes in 2020.
On the global front, WGC’s latest Gold Demand Trends report stated that continued global economic recovery should support consumer demand for global gold jewellery throughout 2021, although COVID-19 disruption in some markets, including India, would provide a headwind.
“Central banks are likely to continue buying gold on a net basis in 2021 at a similar or higher rate than in 2020, driven by a continued focus on diversification and risk management,” the report said.
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