Why Precious Metal Investors Are Watching China and the Fed

(Continued from Prior Part)

India has been a hub for gold consumption, and the country uses around 600 tons of gold each year in jewelry production. The jewelry market dominates t he majority of the gold demand in India . 2H15 is expected to touch a four-year high in terms of gold demand.

“Gold demand will be robust in the second half due to the upcoming wedding and festival seasons. The season started with consumers taking advantage of softening gold prices,” said the WGC (or World Gold Council) managing director for India. The monsoon season is a valuable predictor of India’s global demand. Poor rainfall dampens the prospect of gold demand in rural India, which contributes a significant portion to the overall demand.

At one stage in early August, gold prices were trading at a five-and-a-half-year low of ~$1,073 per ounce, but later rebounded sharply to hit a three-month high of $1,169 per ounce. The falling rupee has played a role in the rising demands for gold in India. Gold futures for December delivery are currently trading at $1,124.5 as of September 4 and have gained 3% on a 30-day trailing basis.

Traders said sustained buying from jewelers, driven by the wedding season demand, kept gold and silver prices higher. Industrial units and coin markets account for a significant chunk of the silver market. Silver futures are currently trading at ~14.07 per ounce and have gained 0.78% on a 30-day trailing basis.

Platinum saw a high of $1,038 and a low of $987 in August. palladium hit a high of $625 and a low of $454.7, which made for a pretty volatile month. The spread trading for these precious metals was also quite volatile. The gold-platinum spread gained about 2.36% on August 24 while the gold-palladium spread rose about 4.5%. The gaining platinum and palladium spreads against gold likely confirm the strengthening of gold as a precious metal compared to its counterparts.

Mining companies saw shinier days as gold surged during the global turmoil. Mining equities like Agnico-Eagle Mines (AEM), GoldCorp (GG), AngloGold Ashanti (AU), and Franco-Nevada (FNV) have gained in the past month as of September 3. These stocks together make up ~18% of the Market Vectors Gold Miners ETF (GDX).

Browse this series on Market Realist:

• Part 1 - The Fed’s Uncertainty about a Rate Hike Is Helping Gold
• Part 2 - Are Central Banks Hoarding Gold Reserves?
• Part 3 - Major Markets and Commodities Slump as Gold Rises