GOLD : Weakness of gold demand
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08/16/2012 | 08:47am
Opinion : Check out the trading range breakout 1542 USD/ 1630 USD
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Investors seem to be no more interested in gold. According to the World Gold Council’s report gold demand fell 7.1% in the second quarter as investment slid and Asian jewelry purchases weakness. The London based industry group said the investment demand slid 23% and jewelry fell 15%. Concerning Asia demand, the most important decline came from India imports. In fact the gold imports of the world’s largest bullion buyer slumped 56% in the second quarter because of many reasons. First of all the Indian rupee’s weakness against US dollar, which have increased the gold price for Indian consumers. In add, the demand was also impacted by the slowing GDP growth and the jewelers’ strike in March and April against government taxes on imports.
The gold demand should recovery in the second half of the year on seasonal weeding, and as economic growth improves. Always according to World Gold Council’s prediction, China will become the top consumer this year on annual basis, exceeding India, mainly due to a strong demand of Central Bank. This phenomenon of Central Banks’ purchases is strong also in other Countries, as Russia, Ukraine and Kazakhstan, which doubled their gold reserves year over year.
Since May the gold is trading in a tight range between USD 1630 and USD 1550. This neutrality is confirmed by the tightening of the Bollinger Bands. This “squeeze” requires attention in the next trading sessions in the case of exit from this horizontal range.
The breakout of upper band could give to gold a bullish power and lead the asset toward USD 1667 and then in the area of USD 1750. On the other hand the breakdown of lower band could push the gold metal toward lows since 2011 to USD 1485.
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