Price momentum and positioning may fuel rallies and create pullbacks, as investors continuously reassess their expectations based on new information.
Chennai: World Gold Council expects investment demand in gold to remain robust for the rest of the year and speculative activity to amplify price movements.
Gold investment demand amidst higher uncertainty — including speculative activity — can sway prices in a meaningful way in the short and medium term but its effects level off in the long run, finds WGC.
"As we look forward to the rest of the year, we believe that consumer demand may be soft and speculative activity could amplify price movements but, overall, it is likely that investment demand will remain robust and central banks will continue their net purchasing trend," it said.
Price momentum and positioning may fuel rallies and create pullbacks, as investors continuously reassess their expectations based on new information. Weaker economic growth may soften gold consumer demand near term, but structural economic reforms in India and China are likely to support long-term demand.
Over the next six to twelve months, financial market uncertainty and accommodative monetary policy are likely to support gold investment demand.
Global monetary policy has shifted by 180 degrees. The market now expects the US Federal Reserve to cut rates two or three times before the end of the year. The Fed is not alone. The European Central Bank's (ECB) President Draghi recently announced that they are ready to extend bond purchases or cut rates to sustain economic growth. The Bank of Japan (BOJ) is also expected to make policy more accommodative. Emerging market central banks are likely to follow suit.