China and India Gold Imports (Feb.)

The latest trade data for India and China showed divergent trends in the two largest consumers. On the one hand, China’s gold imports remained robust although underlying demand appears to have weakened. On the other hand, India’s imports have continued to soften and local prices suggest that this trend persisted through March. While we expect India’s gold demand to recover somewhat this year, we doubt that higher consumption in India and China will be enough to offset lower investment demand elsewhere as a result of Fed tightening. As such, we think that the price of gold will fall back from current levels.