Indian demand is vital for gold because the country is the second-largest buyer of the yellow metal behind China. India, one of the world’s largest gold consumers, could be set to lower its import tax on bullion, which could be major catalyst for gold prices.
Still, emerging market demand for gold has not picked up yet. For instance, China has shown little demand, with the Shanghai Gold Exchange seeing little growth in volume.
“The return of India to the gold market makes sense. Given that many of the factors weighing on demand in 2016 were temporary — including a jewellers strike early in the year, and a cash crunch triggered by demonetization of small bank notes in November,” reports ETF Daily News. “The demonetization effect had been weighing on India’s gold markets even into January. But the strong February import stats show that the worst may now be over, with Indian consumers making their way back to the market.”
For more information on the gold market, visit our gold category.
Tom Lydon’s clients own shares of GLD.