Falling gold prices boost demand in India: WGC

A fall in gold prices has boosted demand in India, the world's second largest consumer, despite the summer months being a traditional quiet period, World Gold Council (WGC) said Thursday.

New Delhi: A fall in gold prices has boosted demand in India, the world's second largest consumer, despite the summer months being a traditional quiet period, World Gold Council (WGC) said Thursday.

It also said that fall in the gold prices are not universally perceived as "negative".

According to WGC, gold prices have fallen by 3.2 percent in India, 3.6 percent in China and 1.2 percent in Turkey.

"Here, consumers will view lower prices as a buying opportunity," it said in its market report.

"As a result, despite the summer months being a traditionally quiet period, retailers in these price sensitive markets have seen an uptick in consumer interest. Consumer interest in India has increased too," it noted.

While the monsoon season is usually a very quiet period for Indian gold demand, this bodes well for the festive season beginning in September, it added.

On June 20, gold prices in the global market had fallen to a five-year low at USD 1,086.18 an ounce amid growing expectations that the US Fed may raise interest rates later this year, eroding appeal of the precious metals.

However, in London market, gold prices bounced back to USD 1,102.68 per ounce today.

According to WGC, "the spectre of the much anticipated US rate rise has hung over the gold price for some time. And a slowdown in China, the world?s largest gold consumer, is clearly an issue many investors will be giving thought to. But this is a partial view."

Headwinds such as the strong dollar and an expectation of US rate rises are probably overstated.

"It would be surprising if expectations of a US rate rise were not already factored into the gold price. And despite the US dollar index rising by 12.5 percent in 2014, the US dollar gold price was flat," it said.

Some key drivers of the gold market that are relevant to investors, WGC said, "Gold is different from commodities. Its demand drivers are diverse and it has low correlations with other commodities and assets classes."

Noting that China's gold demand remains in good health, it said that demand may have eased since the highs of 2013, but its growth trend is intact.

The first quarter of 2015 was the fourth best quarter on record and the People's Bank of China has increased its gold reserves by 57 percent since 2009, it added.

India consumes around 800-900 tonnes of gold annually and is dependent on imports to meet its entire demand.

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