Gold Has Best Month Since January as Indian Demand Set to Surge
Posted by Brian Ford on September 02, 2015
Gold futures jumped 3.5% in August, making this the precious commodity’s best trading month since January. September also started off well, with the price for December delivery rising $7.30 on September 1, its highest level since August 24.
And the best may be yet to come. According to Colin Cieszynski, a Canada-based chief market strategist at CMC Markets, more good news is coming in the near future as more Indians start looking to buy jewelry. “On top of safe haven buying, gold is in a nice uptrend and moving into its strongest period of the year for physical demand with India wedding season approaching fast,” Cieszynski told Market Watch on Monday.
Wedding season on the subcontinent always drives demand, and anyone who took Economics 101 knows what that does to the price of goods. Low demand in India in the first half of 2015 was one factor that hurt the global price, but Shashank Goyal, founder of SLG Jewelers, told Indian news outlet The Hindu that he expects purchases there to soar for rest of this year — perhaps by as much as 70%. “Last year, the demand for gold in the first half of the year was not so good,” he told the paper. “But in the festive season, the demand of gold rose to 35% due to the declining price trend. Demand this year is set to grow at twice that rate.”
Analysts in London, which is the largest location for trading and storing gold on the planet, also saw China’s gold import volume rise recently from Hong Kong and Switzerland, according to the Financial Times. And these two mammoth Asian markets wanting more gold in the months to come has prompted London banking giant HSBC to predict that the price of gold will end the year at more than $1,200 per troy ounce.
Globally, the other large factor currently affecting prices is the “Will They or Won’t They?” question surrounding the U.S. Federal Reserve raising the interest rate. As recently as July, a September rate hike seemed inevitable. But economic turmoil in China, problems in Greece, and sharp currency devaluations throughout the emerging markets made a move much less certain.
Some analysts still see a September increase coming while others are expecting Fed chair Janet Yellen to delay any actions until December — or even as late as March 2016. With just two weeks remaining until the September Federal Reserve meeting, the uncertainty is prompting many in gold and other markets to stay cautious rather than betting one way or the other.
But with gold already rebounding from its July lows and the India-fueled surge looming on the horizon, the outlook is undoubtedly more positive now than it was a month ago. And any further delay in a U.S. rate increase will only make gold more appealing to investors spooked by the chaos coming out of Beijing and disinterested in tying themselves to emerging markets.
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