Demand for gold
China and India together hold 48% of global gold demand, according to Reuter’s data. Demand from China is expected to increase in 2015. According to World Gold Council data, gold imports from China are expected to increase by 11% in 2015.
Demand from India will also increase. The festival season in May 2015 will drive gold prices higher. However, rural India consumes 60% of India’s gold demand. This gold demand mainly depends on the monsoon rain. The monsoon was weak. This signals a possible decline in gold demand. India’s gold demand is expected to drop to 700 tonnes in 2015 from 842.7 tonnes in 2014, according to data from the World Gold Council.
In contrast, the Federal Reserve is delaying its intentions of increasing the interest rate. This is positive for gold prices. Higher interest rates curb gold’s return because it’s used as a hedge against inflation.
Reuter’s surveys suggest that gold prices would average around $1,209 per ounce in 2015 and $1,250 per ounce in 2016. The previous estimates were at $1,234 per ounce for 2015 and $1,278 per ounce for 2016.
The massive supply, sluggish demand, and strong dollar might push gold lower to the nearest support of $1,150 per ounce. Prices hit this mark multiple times in March 2015. However, bullish traders could see key resistance at $1,225 per ounce—driven by the upcoming festival season in India. Gold prices hit this level in March and April 2015.
April gold futures are trading below their 100-day average of $1,211.47 per ounce. The 14-day RSI (relative strength index) is in overbought territory. Prices generally fall from these levels.
Higher gold prices are positive for gold mining stocks like Newgold (NG), Gold Fields (GFI), and Royal Gold (RGLD). These companies account for 10.46% of the VanEck Vectors Gold Miners ETF (GDX). Gold ETFs, like the iShares Gold Trust (IAU), also gained marginally in yesterday’s trade.