“Barring the near term, gold prices should start moving gradually upwards in 2017,” feels Quantum AMC as “the world is in great disequilibrium, both with respect to the global economy as well as geopolitics.”
Besides the potential currency war between the US and China, the concern of political events, especially the French elections, could trigger gold’s appeal if right wing thought sweeps elections there. Such an outcome might facilitate gold’s ascent due to weakening of the Euro against the US Dollar. “But Europe’s consumption demand for gold compares nowhere to the combined consumption of the lustrous metal by China and India,” says Abnish Kumar Sudhanshu, Director & Research Head, Amrapali Aadya. “If the government does reduce the import duty on gold (presently at 10%) as demanded by the bullion industry, we might see a perceptible boost in India’s consumption demand,” adds Sudhanshu. Given the employment generating potential of India’s gems and jewellery industry, the government should be giving domestic triggers to boost demand, that at present remains at about 50 tonnes a month. The government had imposed a hefty duty on gold imports to discourage its imports.
But has this reduced India’s propensity to consume gold? “Yes,” says Bhandari because the investment demand for gold is moving to financial products like sovereign gold bonds, equities and FDs. Gold bonds are indeed gaining momentum, reducing the physical import of gold. “And I see it becoming an excellent way to invest to meet the investment demand of gold in the country.”