The recent drop in the spot gold price below $1,300 per oz is likely to spur demand from consumers and investors, the World Gold Council (WGC) said
“We believe consumers and investors may see the price decline as a good buying opportunity as many have been waiting for a price pullback before entering the market,” it said in a report.
Consumers had been holding off purchases in previous months, anecdotal evidence suggests. Some data already points to an uptick in consumer interest – the top five countries where consumers were searching for gold following the price drop were in the Middle East, with the UAE at the top, it added.
The price correction also comes at a good time for Indian consumers. With a good monsoon, the forthcoming wedding season and the Diwali and Dhanteras festivals, demand could pick up after subdued activity in the year to date, the WGC noted.
In addition, volumes in the physically gold-backed exchange-traded funds (ETFs) picked up in the secondary market while the price fell and they have not resulted in large redemptions so far.
“We believe this is an indication that there is still good appetite for gold [in] the investment community,” it said.
Central banks, a major driver of gold demand, also remain strong buyers of the metal to diversify their reserve asset holdings considering the shrinking universe of non-negative yielding assets, it added. As well, the fundamental environment for gold remains strongly supportive.
“Low and negative interest rates, coupled with continuing political, economic and policy uncertainty… are generally positive for gold,” the WGC concluded.
The spot gold price fell to as low as $1,262.20 on Wednesday, October 5 – it had last traded below $1,300 on June 24. It was recently at $1,264.00-1,264.50 per ounce on Thursday, down $4.05 on Wednesday’s close.
(Editing by Mark Shaw)