© Nik Kalsi
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India officially overtook China as the world's biggest gold consumer last year, and that trend has continued into 2015. Gold demand from India has continued to pick up in the first quarter of 2015, which has mainly been driven by bargain hunting as bullion prices drops to their lowest level in 3 months after the longest losing streak in more than 40 years.
As we have historically seen in the previous years, Indian demand for gold usually picks up pace around the second quarter of the year, during the lead up to the wedding season. Prior to that, one of the most important festivals in the Indian calendar is the celebration of Akshaya Tritiya, which takes place in April.
The Akshaya Tritaya festival is considered an auspicious time to buy gold, which is likely to have a bullish impact on demand and imports. Based on our analysis at The Gold & Silver Club, I predict we could potentially see a 5-10% rise in gold demand from the Indian market during this period.
What other factors may influence gold performance in the nearest future?
Every year gold prices move through a seasonal cycle. From a seasonality perspective we are moving into a very bearish period for gold prices. Starting from May to August, gold prices tend to sell-off or consolidate. This trend is expressed the famous term "Sell in May and go away". From August onwards, it is generally a very bullish period for gold prices as the market enters the Indian festival and wedding season, combined with the build-up to the Chinese New Year. Over the last 3 years we have seen gold demand from India and China significantly increasing during this time of year triggering a rally in precious metal prices, which is what I would expect to see again this year.
Outside of that, from a fundamental perspective, gold is mainly driven by safe-haven buying during times of uncertainty. If any situations arise in the near-term relating to either economic or geopolitical tensions then gold will certainly be the biggest beneficiary.
A key trigger for gold in the near-term could be Greece's future in the Euro zone, which is still questionable. There is growing speculation that if talks breakdown between Greece and the EU, a Greek exit could be on the cards. A Greek exit will leave the European Central Bank holding billions of dollars of Greek debt, which will send investors retreating towards safer shores i.e. gold.
Where do you see bullion for the Q2 of this year?
From a technical perspective, gold is currently trading in a strong downtrend, below both the 200 and 50 Day Moving Averages. With the upcoming FOMC meetings in March and April, there is a high possibility gold prices could fall as low as $1,086 an ounce, especially if the Federal Reserve drop any hints of a sooner-than-expected rate hike. On the flipside, if Gold stabilizes in the near-term, we could expect to see prices consolidate between a range of $1,150 to $1,180 an ounce.