Growing Gold Demand Leads to Delinking from Traditional Relationships

The price of gold this year has increased significantly, even going as far as to record new highs in May. The precious metal has continued defying conventional market correlations with equity markets and the U.S. dollar, as investors in America increase their physical buys.

During this period, we have also observed steady demand of gold from China and strong purchases from central banks as well. Customs data from China demonstrates a 34% increase in metal purchases in the first quarter of the year over 2023. Shanghai premiums are going for about $48 an ounce, which indicates strong demand.

While most buyers of physical gold in China are often the older generation, Gen Z and Millennials have also increased gold buying, with more of them purchasing gold beans because they are more affordable.

Terry Hanlon, Dillion Gage president, has revealed that he’s observed activity from both sellers and buyers even as prices continue to increase. Buyers appear to be attracting people to gold, claiming inflation and geopolitical worries, among other reasons.

Good gold prices also attract buyers while sellers are focused on selling product they purchased when prices were much lower. Hanlon stated that higher prices always attracted investors, noting that more individuals buy the metal while prices are going up than they do when the price is dropping.

Experts were also surprised to learn that many buyers turned to Costco Wholesale for gold. In a recent statement, Costco revealed that it had started offering gold bars on its site and often limited purchases per person to two gold bars. Despite this limitation, the company’s bars sell out quickly after they are listed online. Estimates from Wells Fargo show that in a month, Costco probably sells between $100 to $200 million in gold.

Data on gold demand trends recently released by the World Gold Council demonstrate healthy OTC purchases of gold, which may be enough to counterbalance outflows from ETF’s. According to the council, demand for gold during this year’s first quarter rose to reach 1,238 metric tons, which equates to a 3% increase.

In the same quarter, purchases by central banks hit $289.7 tons while demand from electronics and technology rose to 64.4 tons and 78.6 tons, respectively. The council claimed that a boom in artificial intelligence (AI) increased demand in the electronics sector, with OTC buying also rising to reach 136.4 tons. This represents a 220% increase.

This growing demand for gold is likely to serve as an additional tailwind for exploration and mine development enterprises such as Eloro Resources Ltd. (TSX: ELO) (OTCQX: ELRRF) focused on finding the next commercially viable deposits of precious metals to feed market demand.

NOTE TO INVESTORS: The latest news and updates relating to Eloro Resources Ltd. (TSX: ELO) (OTCQX: ELRRF) are available in the company’s newsroom at http://ibn.fm/ELRRF

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