After the bullion plunged to a four-year low, Asian buyers are catching gold fever and could help support a price floor in the gold market and related exchange traded funds.
On Friday, the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) all rose about 2.5%. Year-to-date, the gold ETFs have declined about 5.4%.
Meanwhile, COMEX gold futures are now trading around $1,171.6 per ounce after rising 2.5% Friday. [October was Unkind to Gold ETFs]
Standard Charter Plc argues that the gold market could find support from Asian demand, notably in China and India, after gold futures fell as low as $1,132.16 per ounce early Friday, Bloomberg reports.
“There is a floor around $1,100 set by Chinese retail demand,” Paul Horsnell, head of commodities research at Standard Chartered, said in the Bloomberg article. “Physical demand indicators out of China and India are firming.”
China overtook India as the world’s largest consumer of gold last year. Both India and China both purchase gold jewelry and bullion as a store of value and popular gifts, especially during last few months of the year.
For instance, China’s gold imports from Hong Kong was the highest in five months over September. The World Gold Council also projects gold demand to increase 20% over three years.
Additionally, Indian jewelers are expecting fourth-quarter sales could jump 75%. The All India Gems & Jewellery Trade Federation points out that gold is often used as a gift during the year-end festivals and during the traditional wedding season.