Gold Backtracks as Asian Demand Shrinks

Gold remains on the defensive Tuesday, with prices falling to a four-week low, and there are some concerns that the lack of Asian demand could lead to lower prices in the near term.

In the first quarter, gold saw unprecedented investor demand, which created the best rally in 30 years; however, a key pillar was missing as demand from China and India was down, a trend that has continued through the second quarter.

“We are seeing gold prices under pressure as markets reprice U.S. interest-rate expectations but there is a risk of a sharper drop as Asian demand remains weak,” said Bernard Dahdah, precious metals strategist at Natixis. “Without Asian demand, this rally is not supported by strong fundamentals.”

Tuesday, June Comex gold futures last traded at $1,235.10 an ounce, down more than 1.3% on the day.

Dahdah said that according to his firm’s research, Indian demand is down by about 50% and Chinese demand is down by about 25% compared to last year. According to the latest data from the World Gold Council, China consumed 241.3 tonnes of gold in the first quarter of this year, down 12% from the first quarter of 2015. At the same time, India consumed 116.50 tonnes in the first three months of the year, down 39% compared to the same time frame last year.

via Kitco

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza