HAI: It looks like sentiment may be shifting in terms of ETF investors. But one area where the sentiment has been bullish consistently is the central bank segment. Russia, once again, was a key driver of that. The economic troubles that Russia faces haven’t reduced its appetite for gold. Is that what it looks like to you also?
Artigas: You and I have spoken plenty of times about the collective trends that central banks are following and the fact that diversification makes sense to them. That applies to a lot of central banks, including Russia.
What is remarkable about this quarter is that central banks were not only net buyers at a very strong level, but they bought in spite of a stronger dollar, which, in the eyes of many last year, would have been a deterrent for emerging markets to add gold.
That underlines our premise that gold's increasing prominence as a reserve asset is a very solid trend that is followed by many, many central banks around the emerging markets. That's because it provides a diversification to their foreign exchange reserves that is very useful to them.
HAI: On the supply side, we saw a bit of a tick higher in mine production, but you're still calling for a peak in production. How much can we see output decline once we reach that peak?
Artigas: We focus a lot of our resources and research on the demand side of the market.
That's not our area of focus, but from what I understand, market commentators are saying that you are not necessarily going to see a collapse in production, but a gradual shift down. What that signals is that the supply side of the equation is, at best, constrained, if not even somewhat in a downtrend over in the next few years.
HAI: What do you think gold investors should watch out for heading into the rest of the year? Is the Fed rate hike already priced in?
Artigas: From our perspective, the gold price already incorporates the fact that the Fed will likely be raising rates this year. It’s apparent that most investors think the Fed will raise rates sometime this year, even though they’re not necessarily certain about the timing.
And even if they do hike, they will be very deliberate about how often they hike. We do not expect this is going to be a tightening cycle in which the Fed is raising rates every meeting. That's a good thing for gold.