Price Drop Likely to Spur demand: WGC

Mumbai: Gold prices have dropped after the Reserve Bank of India (RBI) recently slashed interest rates. World Gold Council (WGC) opines that the price drop is likely to spur demand that elaborates on the latest movement in gold price and its impact on the gold markets in India and worldwide.

The gold price fell by over three percent on 4 October and the move seems to have been driven by speculation of a scaling back in the ECBs asset purchase programme, combined with rising expectations of a US rate hike in December.

Despite the decline, gold remains one of the best performing assets this year, rising by 20 percent in dollar terms.

Anecdotal evidence suggests that consumers had been holding off purchases in previous months, so this may well trigger an increase in demand. The price correction also comes at a good time for Indian consumers. With a good monsoon, the upcoming wedding season and Diwali and Dhanteras festivals, demand could pick up after subdued activity year-to-date.

Market fluctuations will naturally occur from time to time, but the fundamental environment for gold remains strongly supportive. The broader market environment of ongoing low and negative interest rates, coupled with continuing political, economic and policy uncertainty remains unchanged, and are generally positive for gold.