Key for Investors: Could the Gold Demand Rise?



India tightened the belts in 2013

India has been tightening the screws for gold imports since 2013. However, the restrictive measures are now relaxed. The import duty on gold, silver, and platinum raised as much as 10%. The total yearly import target was below 845 tonnes. The restrictions on gold-buying were to confine the country’s imports.

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Rise in demand is expected

However, gold fell 3.62% on a YoY (year-over-year) basis. The guards are down and a tentative rise in demand is expected. The recently released report on gold trends by the WGC (World Gold Council) predicts a 25%–30% YoY rise in gold demand.

Silver, platinum, and palladium have also bled. This resulted in a loss of 5.91%, 16.08% and 25.48%, respectively, on a yearly basis. The last trading price as of August 31 for gold, silver, platinum, and palladium were $1,132, $14.58, $1,010.50, and $602.25, respectively.

Gold demand

According to the GFSM (Government Finance Statistic Manual) report by the IMF (International Monetary Fund) on India’s gold demand, a likely rise of 11% is expected compared to last year. The demand for gold in tonnes stood at 842.7 during 2014. This year, 495 tonnes have already been imported. Another round of imports for the five months from August 2015 to December 2015 should be around 370–380 tonnes.

The demand for gold in the Indian sub-continent has a direct relation to the monsoon and the crop yields. A better monsoon means a good crop yield and higher revenue for the country’s farming population. The population can invest their money in gold.

Miners and ETFs

Leveraged ETFs like the Direxion Daily Gold Miners ETF (NUGT) and the Proshares Ultra Silver ETF (AGQ) have fallen nearly 70% and 18%, respectively, on a YoY basis. Besides the mining ETFs, there are few mining companies that have lost a significant chunk in a year. These companies include Yamana Gold (AUY), Barrick Gold (ABX), Royal Gold (RGLD), and Goldcorp (GG). They account for ~23% of the VanEck Vectors Gold Miners ETF (GDX).


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