Mumbai: Jefferies’ global equity strategist Christopher Wood said gold has entered a ‘healthy consolidation’ period with prices holding above US$3,000 an ounce-a level he described as ideal for gold mining companies to enjoy rising profit margins. In his newsletter, Greed & Fear, Wood said he maintains a 40% allocation to physical gold and 20% to gold mining stocks in his asset allocation for a US dollar-denominated pension fund.

“Normally, when a certain category of stocks outperform, there are strong flows into the related ETFs. But that has not been the case with gold in recent years,” he said. “Flows into gold ETFs in the western world have remained relatively light given the dramatic outperformance of gold since the start of 2022.”

Total known ETF holdings of gold are up 10% from their May 2024 low but remain 20.3% below the October 2020 peak.

Gold prices have risen by 85% since the start of 2022 while the MSCI AC World Index is up only 19% over the same period, according to the note.

Wood said China has increased its gold purchases with imports rising 73% in April from the previous month to 127.5 tonnes, the highest level in 11 months. This volume is equivalent to nearly half of the average monthly global gold production outside China, he said.

“Holdings in China-listed gold ETFs have increased by 82 tonnes so far this year, compared to an increase of 53.3 tonnes in all of 2024,” the note said.