“I think we're going to see increasing resistance” from current levels, Steel says, explaining, “There's a couple of things that would imply that the market is going to run into some resistance. One is that jewelry, underlying physical demand, is down. Jewelry is down. Fifty percent of all physical demand for gold is in jewelry. Most of that is in the non-OECD world. That demand is slowing because of high prices. They're very price-elastic. Coin and bar demand is slowing as well.
On central bank purchases, Steel says, “There's very good reasons that a central bank would want to own more gold, but they will also be price sensitive, and we are at very high prices, and if they're playing a long game, they don't have to rush into the market. I think we're likely to see them moderate purchases in the second half of the year, which may also create a little bit of headwind for gold.
How much of that is is predicated in in gold going higher from these levels, predicated on the fed aggressively cutting or continuing to cut.I mean, uh, gold does have a history of, uh, rallying during fed, uh, rate cutting cycles.And certainly after the 50 basis point cut, perhaps we won't see, uh, a cuts quite that aggressive.
It doesn't mean that they're not still on a long term buying, uh, programme, which, and we believe there's very good reasons that a central bank would want to own own more gold.And if they're playing a long game, they don't have to rush into the market.Moderate purchases, Uh, in the second half of the year, which may also create a little bit of headwind for gold.
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