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Indian and Chinese demand to keep bullion prices stable

Global money supply surge could result in a gold rally

  • By Babu Das AugustineDeputy Business Editor
  • Published: 16:48 February 10, 2014
  • Gulf News

  • Image Credit: Agencies

Dubai: Traders and experts speaking at the Global Commodity Conference in Dubai on Sunday said that 2014 may see some upside swings in gold prices with markets potentially remaining volatile through the year.

The conference, organised by Richcomm Global Services, was supported by Dubai Multi Commodities Centre (DMCC).

Speaking at a panel discussion, industry players and analysts said despite the higher import duties introduced by India, a key market for physical gold and large scale liquidation of paper gold (ETFs) in the West, gold demand has strong support from People’s Bank of China which is adding bullion as reserve and consumption demand from India.

“We have seen strong demand for bullion in 2013 which has continued into January 2014. The Indian consumers see gold as a store of wealth and this characteristic is unlikely to change despite the hike in Indian bullion import duty from 1 per cent to 10 per cent,” said Harish Pawani, Managing Director, Bin Sabt Jewellery.

 

High stakes

DMCC has high stakes in the global bullion market with more than 25 per cent of all global physical bullion, over $70 billion of gold and over $40 billion of diamonds are traded per annum in Dubai.

Gold gained more than 3 per cent in the first month of 2014 following its worst trading year in three decades. Industry representative differed on the sustainability of a recovery in gold prices.

“Given the recovery in the US economy and changes in the monetary policy prices are likely to remain under pressure and range as low as $1,150 to the year end of $1,279,” said Chandu Siroya, Managing Director, Siroya Jewellers.

There is a section of the market that values gold as a proxy currency and its relative value in dollar terms has been under pressure throughout 2013, as Federal Reserve’s quantitative easing flooded the markets with cash, and the jury is undecided on the impact of tapering, unemployment and US growth prospects.

While the panel in general agreed that gold is going to be reactive to the macro economic conditions, Rolf Schneelbeli, CEO, Gold Services AG, said the US with a money supply in excess of $3.6 trillion will eventually show up the intrinsic weakness of dollar and rising inflation. Experts believe that the excessive money supply in the US and other leading economies of the world could eventually result in higher inflation of debasing of currencies including the dollar that could translate into a gold rally.

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