HAI: It definitely sounds like these are normal fluctuation and that the long-term uptrend in China’s demand is still intact.
Artigas: Yes, from our perspective. The Chinese government certainly wants to make sure that China is stable and continues to grow. If you look at how the stock market is behaving and what analysts are saying about China, it is likely that the government will help stabilize markets and provide some growth long term.
While China may be decelerating a bit, analysts are pretty much all in consensus that between now and the next five to 10 years, emerging markets broadly—China included—will make up more than 50 percent of GDP and GDP growth.
There's going to be a lot of economic output coming from emerging markets, China included. And that helps solidify the long-term trend in terms of savings and jewelry buying. People understand gold. They like gold as a way to preserve wealth and to protect capital long term.
HAI: One interesting thing I saw in the latest Demand Trends report was the ETF buying, with the western ETF investor coming back as a net buyer for the first time in two years. Do you think that’s the start of a bullish trend?
Artigas: Of course, we don’t have a crystal ball to know exactly what will happen for the full year, especially when it comes to investment. Investment trends will react to various conditions and changes to economic expectations and many other things. But what I can tell you is that you definitely saw a huge reduction in outflows between 2013 and 2014. And then, by 2015, those turned into net inflows.
I can also tell you that—more anecdotally based on our conversations with investors—last year around this time, investors were far more bearish. Many of the questions they were asking revolved around perhaps how much lower could gold prices go.
So far this year, the conversations have changed quite a bit. They have turned more into questions about what’s the upside in gold? What are the factors that are influencing it? How can the gold market regain its footing in various fronts? That is a stark change over the past two years, which has been also reflected in inflows in ETF.