Gold exchange traded products, including the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL), have traded mostly flat over the past few days, leading some gold market observers to highlight geopolitical flareups and demand trends as the most credible near-term catalysts for the gold metal.
Gold prices could move modestly higher with some help from emerging markets, namely China and India. However, the dollar has recently retreated in noticeable fashion, helping aid gold’s ascent along the way.
Gold has enjoyed greater demand in a low interest-rate environment as the hard asset becomes more attractive to investors compared to yield-bearing assets. However, traders lose interest in gold when rates rise since the bullion does not produce a yield.
“Gold continues to receive bullish news from outside markets and geopolitical events. OPEC has agreed to extend production cuts for another 9 months, the Macron election victory in France (bolstering the Euro) and the North Korean standoff have made the case for Gold as a safe haven investment. However, the 800 lb. gorilla in the room is physical demand for the metal,” according to OptionsExpress.
Gold prices could move modestly higher with some help from emerging markets, namely China and India. However, the dollar has recently retreated in noticeable fashion, helping aid gold’s ascent along the way.
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.
“Demand dropped by 18% in Q1 2017 from the same period last year, according to the World Gold Council (WGC). The WGC did note that this could be skewed by the “strongest ever first quarter in 2016.” Indian demand was very strong in Q1, rising 15% over the year earlier. Many analysts, though, expect the country’s overall demand to be in line with last year, which could mean a letdown in the second half of the year,” adds OptionsExpress.
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Tom Lydon’s clients own shares of GLD.