Research

This report looks at the future of the gold market in India. It puts in context the market for gold, and examines the strategic outlook for the Indian economy and gold demand over the next decade. There is short discourse on the mythological and cultural significance of gold in India as well as detailed econometric analysis of Indian gold demand from 1980 to 2009.

The World Gold Council has conducted extensive research on gold and has demonstrated in past submissions to the Basel Committee on Banking Supervision that gold meets the fundamental and market criteria required to be considered a high quality liquid asset for Basel III.

We discuss the limitations of the most common arguments and contextualise gold’s price pullbacks. We examine structural shifts that gold market has experienced over the last decade resulting in a robust set of demand factors, very different from that seen during the 1970s.

We view the direction of the US dollar as well as the strength of Asian demand as key indicators of gold sentiment. Further, potentially reduced mine production at lower prices should, in our view, limit the downside. Finally, our research shows that gold should not be looked at in isolation but as part of portfolio and that a small strategic allocation can reduce the long-term level of risk.

Gold is up by 9.2% so far this year. This surprised many market participants as most analysts predicted lower prices. Some investors took advantage of last year’s price correction to buy gold but investment demand has remained tepid. We consider that the current environment of high bond issuance, tight credit spreads and record low volatility continues to offer a prime opportunity for investors to add gold. In our view, gold can reduce overall portfolio risk and it is cheaper to implement than many volatility-based strategies.

This edition of our Investment Commentary examines gold’s performance year-to-date and explores relevant macroeconomic factors that can influence gold’s performance into Q4 2014.

India has an ambivalent relationship with gold. For consumers, gold is a prized asset, cherished as both an adornment and an investment. For the government, gold is a major contributor to the current account deficit, a challenge that needs to be addressed.

Trish Regan sits down with William Rhind, CEO of World Gold Trust Services, to talk about his outlook for the commodity in current market conditions.

Despite economic uncertainty in some regions, the gold price declined in the first half of 2015. While puzzling to some investors, this is consistent with market expectations that the risks could be contained. 

On Monday 20th July the gold price fell sharply, dropping 4.3% from its Friday closing price. This note explains what happened and counters some misconceptions.