Gold demand to falter as Chinese buying weakens, Metals Focus says

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LONDON, June 8 (Reuters) – Demand for gold will dip this year, mainly due to weaker jewellery sales and retail investment in China due to COVID-19 lockdowns and an economic slowdown, consultants Metals Focus said.

Supply of gold, meanwhile, will rise slightly as mines expand production and recycling increases, Metals Focus said in its annual Gold Focus report.

It predicted the gold price would average $1,830 an ounce in 2022, up 1.7% from $1,799 last year. On Wednesday, it was trading at around $1,850 an ounce.

The consultancy expects a soft landing for the global economy, but higher interest rates resulting from central banks fighting inflation will weigh on prices in the second half of the year.

“As policy rates rise and inflation declines, we expect that real rates and yields will rise materially during the second half, putting pressure on the gold price,” said Neil Meader, director of gold and silver at Metals Focus.

The downside will be limited, however, as weaker economic growth and systemic risks will encourage investors to diversify into gold, he added.

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