Asian demand likely to keep gold market bullish in 2016: WGC

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Mumbai | Published: December 18, 2015 7:20:55 PM

Asian markets, which continued to be strong drivers of gold demand this year, are expected keep sentiment bullish in 2016 as well with the introduction of pro-gold schemes...

gold import“2015 has been a fascinating year for the gold market, with strong demand from central banks, Asian markets and the European bar and coin market.” (Reuters)

Asian markets, which continued to be strong drivers of gold demand this year, are expected keep sentiment bullish in 2016 as well with the introduction of pro-gold schemes, World Gold Council said today.

“We are likely to see further developments in the key Asian markets with the continuing introduction of the pro-gold schemes and potentially a gold exchange in India,” WGC said in a release issued here.

Similarly, following the launch of the International Board by the Shanghai Gold Exchange (SGE) will open up the Chinese gold market to international investors, it said.

SGE’s plans to introduce a yuan-denominated gold pricing mechanism to facilitate regional market trading are also likely to take shape in 2016, WGC added.

“2015 has been a fascinating year for the gold market, with strong demand from central banks, Asian markets and the European bar and coin market.”

“The pro-gold schemes introduced by the Indian government and the further internationalisation of the renminbi alongside the increasing transparency of Chinese gold reserves will continue to improve the market next year,” WGC Head of Market Intelligence Alistair Hewitt said.

He said gold’s role as a portfolio diversifier, wealth preservation tool and a tail risk hedge will continue to prevail due to expensive stock valuations and high liquidity risks.

“Moreover, gold’s cultural significance endures as we look ahead to 2016,” Hewitt added.

While there are some concerns about GDP growth across emerging markets, economic output continues to increase and so do incomes. This, in turn, strengthens the case for gold as a long-term strategic asset and wealth preservation tool, he pointed out.

In 2015, Asian markets were strong drivers of gold demand with both India and China up year-on-year as of the third quarter.

Global bar and coin demand is more than double its pre-crisis levels. Thee strength of bar and coin demand in Europe is now well established, having been non-existent prior to the financial crisis, WGC said.

This year, recycling was also down and mine production has begun to level off.

Further, in 2015, the Indian government introduced the gold monetisation scheme, a gold bond and a sovereign gold coin in order to monetise the gold stocks that are estimated to be about 22,000 tonnes.

In China there have also been dramatic changes this year as The People’s Bank of China’s (PBoC) announcements on the additions to their gold reserves from June have been a welcome development in transparency, it said.

And gold’s role in protecting against currency weakness was illustrated perfectly on August 11-12 this year after the PBoC devalued the yuan, it added.

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