Chinese demand on a rise
What exactly constitutes gold demand in China remains a much-disputed topic. Specifically, the question remains whether it is best to use the import numbers for China or the withdrawals from its SGE (Shanghai Gold Exchange). India and China are the major demand sources for gold. A future surge in demand from these countries may provide some support for gold. However, the upcoming rate hikes from the Federal Reserve may weigh on gold. We’ll have to see which of these factors has a bigger impact on gold. In 2015, the looming rate hike was influential and pulled down gold prices almost 10% despite high demand.
In 2015, the SGE saw a record high of withdrawals of approximately 2,596 tons, which marginally fell short of analysts’ expectation of 2,600 tons. The 2015 figure surpassed the 2013 record high of 2,181 tons. In the final week of 2015, when the price of gold floated between $1,060 and $1,080 per ounce, the SGE witnessed a withdrawal of almost 41 tons.
A further surge in buying patterns during the coming year may provide support to the precious metals. A rise in the precious metals, especially gold, can positively affect the SPDR Gold Shares ETF (GLD) and the iShares Gold Trust (IAU).
Mining companies suffered a lot of carnage in 2015. A further fall in 2016 would negatively impact stocks like Kinross Gold Corporation (KGC), IAMGOLD Corporation (IAG), and Gold Fields (GFI). These three companies together make up 7.8% of the VanEck Vectors Gold Miners ETF (GDX).