Gold exchange traded funds could find support from emerging Asia economies as many turn to the precious metal to combat rising inflationary pressure.
According to HSBC Holdings Plc., gold jewelry, bars and coin demand in India, Greater China, Indonesia and Vietnam jumped to 60% of the global total, compared to just 35% in 2004, reports Glenys Sim for Bloomberg. [Gold ETFs Could Find Support From Central Banks]
“In markets like India, Vietnam and China, consumers have few tools with which to protect their savings against rising prices,” economist Frederic Neumann said in the article. “In recent years, rising inflation stoked demand for gold in a number of markets.”
The recent decline in gold prices has helped spur greater demand for gold buyers across Asia as a store of value in light of increasing inflation. For instance, demand for gold in India more than doubled since 2008 while Chinese consumption surged 350% – India and China are the world’s two largest consumers of gold.
“With inflation still elevated in many markets and interest rates not offering adequate compensation, expect Asia’s voracious appetite for gold to persist,” Neumann added. “Asia is going for gold. Over recent years, demand has soared.”
India, though, has already increased import taxes on bullion three times this year in an attempt to dampen gold demand, which has helped exacerbate the current-account deficit and weakened the rupee.
Gold futures are currently trading around $1,313 per ounce.
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Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own GLD.
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