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Gold demand likely to increase in 2016

Posted on: 11/Feb/2016 2:38:51 PM
According to the World Gold Council (WGC), gold demand in India is likely to increase this year. The reason for this hike is cited to be interest rate hike imposed by the US Federal Reserve and the uncontrolled state of stock market. Such a stronger demand in India which is the second biggest gold consumer will largely back the gold bullion price that is beating around its highest in the past eight and a half months.
 
The managing director of WGC`s Indian operations, PR Somasundaram said the overall demand is highly promising. For the very first time in past ten years, there is going to be rate hike by the Federal Reserve. Furthermore, the demand gets boosted with stock market happenings, says Somasundaram. So far, since beginning of 2016, there is a 16 percent price hike in gold while there is a 10 percent drop in Nifty.
 
In 2015, as compared to the earlier year, there was a 2 percent increase in demand. It was 848.9 tonnes last year, as per data from WGC. As per reports, such increase has occurred despite changes in overall global gold consumption. There has been a boost in demand for the jewelry in spite of poor weather conditions. Owing to continual drought in the country for more than thirty years, earnings of millions of farmers were limited. To note, almost two-thirds of gold demand in the country is to be credited to the rural population. Ever since 2010, the highest of gold demand in India was in 2015, but there is cautious outlook.
Such a cautious look is necessary as we are stepping deeper into 2016 as the rural income is getting curtailed due to adverse weather conditions and increasing inflation.
 
Somasundaram also added that there will be a fall in gold smuggling in 2016. Last year, the drop in smuggling was 75 tonnes. In 2013, with increase in import duty on gold increased gold smuggling as well. In the year 2015, China stood as the biggest consumer of gold and this was followed by India being the second. There was a 3 percent hike in demand last year and it remained at 984.5 tonnes. Owing to slowing economy, there was ease in jewelry demand in China last year. There was surge in investment demand as the demand for gold bars and coins were boosted by weakening currency.