Sentiment has turned up in the gold market the last few weeks. And new data from the world’s top consuming center — India — shows there may indeed be cause for optimism amongst bullion buyers.
Data reported in the local press showed that India’s gold imports saw a big jump during the most recent quarter, January to March 2017. With total imports for the period hitting 230 tonnes.
To put that in perspective, consider some numbers from recent quarters — during which India’s gold imports showed some of the weakest figures on record.
During April to October 2016, gold imports totalled just 264 tonnes. Meaning that incoming shipments for that entire seven-month period were barely above the figures for the most recent three months.
That suggests a major surge in gold demand is happening here. In fact, imports for the Jan-Mar 2017 quarter were the strongest for those months since 2013.
The pick-up in buying appears to be related to the Indian government’s recent crackdown on cash. With the government having banned small banknotes effective as of early November.
Since that event, gold imports have jumped to 360 tonnes for the five months from November to March. More than 35% higher than total imports for the preceding seven months.
India’s citizens are reportedly turning to gold as a safe haven amid doubts about paper money. Which bodes well for continued support in this key gold market as 2017 goes on.
How big a lift could that give to global gold prices? If we annualize the figures from the past quarter, India is on pace to import 920 tonnes for this year. Which would represent a massive improvement from the 13-year low imports of 571 tonnes the country saw in 2016.
It’s notable that global gold prices also perked up during the past quarter. As the chart below from Kitco shows, we’ve gone from $1,150/oz at the beginning of January to $1,280 recently.
It’s actually unusual to see India’s demand growing when gold prices are going up — with Indian buyers usually cutting back purchases when the metal gets more expensive.
The fact that prices and demand are rising in tandem could signal an important and positive shift in fundamentals — watch for April import figures in a few weeks to see if the trend continues.
Here’s to coming back to life. – Dave Forest
Gold’s strong run could continue as the US dollar weakens and investors seek safe-havens in the face of increasing geo-political risks, according to Prestige Economics.
The price of gold bullion has risen 11% this year as investors look to the commodity as a refuge from the uncertainty surrounding US President Donald Trump’s political and economic policies.
Gold bullion rose 0.8% to $1,296 per ounce on Monday, its highest level since 9 November, but has since fallen back. Bullion is currently trading at $1,287 per ounce.
Jason Schenker, founder of Prestige Economics told Bloomberg: “Gold is going higher here. We see a gradually weakening dollar on trend.
“Although we expect two more rate hikes this year – September, December – and four rate hikes next year, what we also think is that a lot of that is priced in.”
Markets are responding to geo-political tensions across the globe, especially military actions from the US.
Last month, investors went into risk-off mode as opposition from his own party meant Trump failed to pass his healthcare reform bill in Congress, prompting a fall in the US equity markets.
Meanwhile, this month, the US bombed Syria and the Islamic State in Afghanistan,while Trump said he was willing to consider a military strike on North Korea after a ballistic missile launch by the country failed.
Furthermore, in a survey conducted by Bloomberg last week, analysts were the most positive on gold since December 2015.
Schenker added: “If we get weak Q1 GDP numbers, equities are going to take a big hit, the dollar is going to take a big hit and gold is going to sky-rocket.” – Tom Eckett
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