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Gold Set to Shine on Stronger Asian Demand

Jan 16, 2017 5:30 AM   By Rapaport News
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RAPAPORT... The World Gold Council (WGC) predicted gold prices will continue to rise in 2017 as growth in Asia and political uncertainty in the west are expected to support demand.

“Not only will gold remain highly relevant as a strategic portfolio component, but also six major trends will support demand for gold throughout 2017,” the WGC wrote in its 2017 outlook report.

China and India accounted for more than half of the world’s gold demand in 2016, and, despite some short-term headwinds in both markets, will continue to drive global consumption, the council said.

In China, investment demand for gold has grown, outweighing the weakness in the jewelry sector which has suffered because of changing consumer tastes, the group noted. With investment platforms such as ETF’s growing rapidly and interest in new products continuing to rise, innovation should support China’s gold market in years to come, the council explained.

In India, the WGC expects the liquidity squeeze resulting from the government’s demonetization policy will impact gold demand in the short-term. However, by eliminating INR 500 and INR 1,000 notes from circulation, the transition to transparency and formalization of the economy will lead to stronger Indian growth in the long term, thus benefiting gold, the WGC predicted.

Meanwhile, parliamentary elections in key European states such as Germany and France, and the likelihood of Britain’s exit from the European Union turning out to be unorderly are all positive developments for gold. Furthermore, the risk of U.S. President-Elect Donald Trump’s negotiations on trade, especially with China, turning belligerent will probably benefit the metal in the long run.

“Gold is especially effective as a safe haven during times of systemic crisis, when investors tend to withdraw from risk assets,” the council explained. “As a high-quality, liquid asset, gold benefits from safe-haven inflows.”

In addition to Asian growth and political risks, the council listed currency depreciation, rising inflation expectations, stock market valuations, and rising demand in new markets as developments that will underpin demand for gold.

The metal rose 4 percent in the first two weeks of this year, trading at $1,202.6 an ounce on Monday, having jumped 10 percent last year.
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Tags: China, gold, India, Rapaport, Rapaport News, World Gold Council
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