There are countless drivers for gold demand. Two of them are seasonal, and regardless of what it happening politically or economically, always serve as a boon for gold.
Diwali is the Hindu festival of lights and is widely celebrated in India; part of the tradition involves purchasing items made of gold. The Chinese are is the single largest buyers of gold jewelry, and demand for gold jewelry rose 7% in Q118 to a three-year high.
These components of “The Love Trade” provide seasonal support for the gold price.
Gold was up half a percent year-to-date through last Friday. This doesn’t sound very exciting, but over the same period, the S&P 500 Index was in the red—the first time in nearly a decade that stocks have been negative for the year through the beginning of May.
The yellow metal is doing the one thing for which many investors have it in their portfolio—namely, it’s trading inversely to the market. This highlights its longstanding role as an attractive diversifier and store of value.
Gold has been under pressure from a strengthening U.S. dollar, and May has historically delivered lower prices.
As I’ve pointed out before, this makes it an ideal entry point in anticipation of a late summer rally before Diwali and the Indian wedding season, during which gifts of gold jewelry are considered auspicious. Demand in China for the remainder of the year also looks promising.
ORIGINAL SOURCE: Gold Love Trade Looks Promising in India and China by Frank Holmes at US Funds on 5/8/18...
- ^ Gold Love Trade Looks Promising in India and China (www.usfunds.com)
- ^ US Funds (www.usfunds.com)