‘When the gold price rises rapidly, India’s physical gold market remains on standby.’<\/strong><\/p>\n IMAGE: A customer checks out a gold necklace. Photograph: Rupak De Chowdhuri\/Reuters<\/span><\/p>\n John Reade<\/strong>, Global Chief Market-Strategist at the World Gold Council, was in India recently.<\/p>\n In an exclusive interview with Rajesh Bhayani<\/strong>\/Business Standard<\/em>, Reade said the price of gold will face headwinds in the near future.<\/p>\n \u00a0<\/p>\n Gold prices are very high despite burgeoning inflation. What is your reading of the situation?<\/strong><\/p>\n A strong dollar and rising interest rates are driving gold prices to where they are now.<\/p>\n When the price of gold was higher in 2020, a higher inflation rate was anticipated, which happened with a little lag.<\/p>\n As the US Federal Reserve has been raising (interest<\/em>) rates, the price of gold has more headwinds ahead.<\/p>\n As long as the US Fed keeps surprising the market with rate increases, gold will face headwinds.<\/p>\n There is a risk, however, that a very sharp increase in interest rates will hurt growth, and see the US economy eventually slip into sharp slowdown, though no such signs are seen yet.<\/p>\n This could lead to stagflation which is a good scenario for the gold price to rise.<\/p>\n Any dip in gold price could be an opportunity to buy.<\/p>\n However, from India’s price perspective, if the US dollar weakens and gold price recovers, then in rupee terms a rebound in prices may not be of similar strength.<\/p>\n What we see today is not an end of gold, it’s just part of the cycle.<\/p>\n In view of the emerging price outlook for gold, do you see demand coming under pressure?<\/strong><\/p>\n Looking at the Indian physical market, it’s possible.<\/p>\n We know that when the gold price rises rapidly, India’s physical gold market remains on standby.<\/p>\n Sharp rises or falls are not seen positively. The Indian market loves stability.<\/p>\n So, short-term pressure on demand slowdown isn’t ruled out. I’m not concerned about long-term demand.<\/p>\n Looking at other regions, China’s gold demand has weakened due to Covid-related restrictions and may remain weak for the rest of the year.<\/p>\n I won’t be surprised if India’s gold demand surpasses that of China in the near term.<\/p>\n There have been some pockets like North Europe, North America where demand was seen.<\/p>\n However, so far as gold demand for investment is concerned, the overall scenario is currently not in favour.<\/p>\n High import duty for gold in India is also a concern for demand, isn’t it?<\/strong><\/p>\n We hope this (high duty on import<\/em>) is for the short term and will be reversed.<\/p>\n How do you see gold supply going forward when the price outlook is not rosy?<\/strong><\/p>\n Sixty per cent of gold supply comes from mines. The rest is mostly recycled old gold jewellery.<\/p>\n Mine supply is likely to moderate even though there have been some new discoveries and new mines have also come up.<\/p>\n Supply from old gold also depends upon the quantum of strain on the economy going ahead.<\/p>\n Old gold supplies have been higher when prices spike.<\/p>\n That is not the case now and hence gold supply is likely to moderate.<\/p>\n The international gold exchange has started operations at India’s International Financial Centre at GIFT City. Do you see the exchange emerging as a global gold trading hub?<\/strong><\/p>\n What I see is that the exchange is designed for routing gold imports in India through it and removing middlemen in imports. And that objective can be easily achieved.<\/p>\n Even the bullion exchange at GIFT City will facilitate domestic gold exchange functioning.<\/p>\n However, making GIFT City IFSC a trading hub for gold will not be easy as it requires a great deal of liquidity on the exchange.<\/p>\n What are your views on the aggressive marketing of digital gold in India?<\/strong><\/p>\n This is yet another channel for gold buying. And it has huge potential.<\/p>\n However, whoever is buying digital gold should know who the counterparty is.<\/p>\n If the company from whom you are buying digital gold goes bankrupt, then whether or not you can get your gold is an important factor.<\/p>\n What do you think of the RBI’s decision to buy gold for its forex reserve?<\/strong><\/p>\n RBI has bought 13 tonnes according tp the latest data available with the WGC.<\/p>\n This is sharply higher than its monthly average gold purchases the past few years.<\/p>\n RBI has set an example for other emerging markets’ central banks.<\/p>\n We don’t know about RBI’s future plans, but feel it will continue adding gold to its reserves.<\/p>\n Feature Presentation: Rajesh Alva\/Rediff.com<\/a><\/em><\/strong><\/p>\n<\/div>\n[ad_2]\n<\/p>\n News From This Website <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<\/p>\n
IMAGE: John Reade, Chief Market Strategist, World Gold Council.
Photograph: Kind courtesy John Reade\/Twitter<\/strong><\/div>\n