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Watch closely as gold prices come under pressure
Gold’s price is impacted by the difference between indicators in the US and the rest of the world. The US dollar impacts gold the most.
Economists expect that going forward, consumer spending should pick up as people start to spend their windfalls from falling oil prices.
Cheaper oil means lower inflation. This means gold should be negatively impacted, as it is usually considered to be a hedge against inflation.
Overall gold holdings in ETFs were 1,643 tons as of November 4, which is its lowest value in five years.
The Fed has held rates near zero since December 2008, and any increase would lead the dollar to strengthen against other currencies.
The GDP growth figures for Q3, in addition to Q2’s growth, creates the strongest six-month period of expansion since 2003.
Improving consumer sentiment usually indicates an improving job market, increasing incomes, and overall positive growth prospects for the economy.
The US economy is doing better than many of its peers, and this difference usually leads to a strengthened US dollar in relation to other currencies.
ECB is considering an expansionary policy, which will help strengthen the US dollar further against the euro. A strengthened dollar is negative for gold prices.
Japan’s asset buying program’s goal is to encourage a healthy level of inflation in the economy and boost investment activity.
Strong employment rates signal strong economic growth prospects, and recent US labor market data has been quite positive.
In October, the BEA Advisory Committee said inflation in the near term will likely be held down by lower energy prices and other factors.
Gold doesn’t offer anything in terms of regular income. In fact, it entails a negative cost of carry such as insurance and storage.
Gold isn’t a traditional consumable, which impacts its supply dynamics. Gold’s price depends on the valuation of assets like equities, bonds, and real estate.
All else equal, central bank buying is supportive of gold. Another consideration is that while gold is hard to value, it has performed better in certain environments.
Physical demand from China and India seems strong. This could provide short-term support for gold prices. The USD strength and the expectation of the federal rate hike could put pressure on gold prices.
The World Bureau of Metal Statistics (or WBMS) reports China’s mine output on a monthly basis. For January–August 2014, China’s production grew by 6.4%.
High-grading is when the high-grade portion of the mine is mined first. This increases the grade of the ore that’s mined. Also, it lowers the cost per unit. However, this trend is bad for long-term supply.
The value data for gold imports is reported by Reserve Bank of India (or RBI) every month. It shows India’s physical gold demand. India imports ~90% of the gold it consumes.
Traditionally, India has been the number one gold consumer. Recently, it was overtaken by China. It still accounts for ~25% of the total demand.