The latest trade data for India and China were a mixed bag. On the one hand, China’s gold imports bounced back, pointing to strong demand ahead of the New Year holiday. On the other hand, India’s imports softened and local prices suggest that this trend persisted through February. 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.
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