Not Sure What To Do With Your Gold Positions? Let's Take A Look To The Far East For Some Answers
New York (Oct 15) Summary •Indian gold premiums are rising with this recent drop in gold signalling physical buyers think that gold is a bargain here.
•Chinese premiums haven't risen as much, but they are rising as well and signal Chinese gold demand is recovering.
•Unlike in 2013, ETF gold holdings have not dropped significantly with the gold price and that is bullish.
•There is more data to come from Swiss gold exports and Chinese imports, but we think these factors are positive for gold and investors should re-establish sold positions.
As we have mentioned before, the recent run in precious metals over the past six months has been primarily driven by Western investor demand for gold, mainly in the ETFs and precious metals funds. This is in stark contrast to demand in the East that has been very subdued in the physical gold markets as Chinese and Indian buying has been lackluster at best. In fact, weak Eastern demand is one of the main factors why we thought gold had little room left to run over $1,300 until we started seeing buying from the non-Western physical markets pick up.
With the recent drop in gold, we turn our attention to the Chinese and Indian markets to see if buying has picked up, and we will start with Indian gold premiums.
As investors can see, the Indian gold premium was actually negative for a good portion of 2016, which goes along very closely with the drop in Indian gold imports since the beginning of the year. With the recent drop in gold, we are seeing premiums rise quite steadily to some of the highest levels since late 2014. That is positive news from the perspective of gold bulls as it suggests we will see physical demand pick up some of the slack from the drop in Western demand.