India, China will back gold: WGC

With the yellow metal taking a hit after the Federal Reserve hiked its interest rate, the World Gold Council (WGC) on Friday claimed that Asian markets, particularly India and China, will lead the improvement in the gold market in 2016.

However Mr Prithivraj Kothari, managing director, Riddhi Siddhi Bullion, says it is too early to say what 2016 holds for gold. “It depends on the economy and sentiment,” he said, adding that India and China will continue to import 800-900 tonnes of gold.

Alistair Hewitt, head of market intelligence for the WGC, who said 2015 has been a fascinating year for the gold market, predicts that “The pro-gold schemes introduced by the Indian government and the further internationalisation of the renminbi alongside the increasing transparency of Chinese gold reserves will continue to improve the market next year,” he predicted.

“Gold’s role,” he says, “as a portfolio diversifier, a wealth preservation tool and a tail risk hedge will continue to prevail due to expensive stock valuations and high liquidity risks.”

On the impact on gold of the strengthening dollar following the US Fed hike, Mr Hewitt says “Whilst the US dollar price is one driver of gold demand it is not always the most relevant factor for most investors. Physical demand for gold is truly global — more than 90 per cent comes from outside the United States, primarily the Asian economies — particularly China and India and in these econ-omies local price matters most.