Asian Metals Market Update: Indian Gold Imports

There is still a debate on the quantum of interest rate hikes in March. None of the Federal Reserve speakers have backed an aggressive 0.50% interest rate hike in March. In my view, an interest rate hike between 0.10% to 0.25% interest rate hike will be there in March. From five interest rates by the Federal Reserve this year to three interest rate hikes. Some of the Federal Reserve officials have already started commenting that they are uncomfortable with five interest rate hikes this year. They are comfortable with three interest rate hikes.

The message is very clear. Federal Reserve officials want US stock markets to continue to rise after the interest rate hike in March and every interest rate hike this year. Federal Reserve is uncomfortable even with a short-term bearish trend in US stock markets. They are ready to accept bubble and bubble after bubbles and higher real inflation rather than see a short-term bearish trend in stock markets. The net impact will be very volatile global financial markets. Every asset class will be a war between bulls and bears this year. The best way to get over the same is to hedge in options or use a combination of bull-spreads/bear-spreads.

 TODAY

Bank of England meeting, European central bank meeting, and US January private ADP jobs numbers are the key today. Interest rate stance by BOE and ECB will impact cable and euro. This in turn will affect the US dollar Index. Gold price will see another wave of rise if US dollar Index falls after ECB press conference after 7:15pm Indian Time and vice-versa.

A bit on India’s gold imports

The World Gold Council has said that India’s 2021 gold imports 924.60 tonnes. India’s gold jewelry demand reached a six year high of $610.90 tonnes in 2021. Gold investment demand also surged to a six year high of 79 tonnes.

My view on India’s gold imports

2022 gold imports will be less than 2021. Why?

1. Government of India has launched various gold monetization schemes. I am sure that they will be highly successful in 2022-2023 fiscal year. This will reduce India’s gold imports.
2. Income from stock markets will be less in 2022 as compared to 2021. My reasoning is that retail traders and retail investors made a historically high profit by trading and investing in Indian stock markets. Some of the profit from stock markets was used to purchase gold jewelry and real estate. India’s gold jewellery demand will be much less in 2022 due to lower income from stock trading/investing.
3. India’s gold demand is price elastic or price sensitive. If global gold price plunges or trade with a softer bias (due to whatever reasons) then Indian gold imports will break the $1000 tonne barrier.

Spot Gold:

• Gold has to trade over $1788-$1793 zone to rise to $1815.20.
• Gold will crash if it trades below $1790 after London opens to $1783.40 and $1769.90.
• A daily close below fifty-week moving average around $1793, today, tomorrow, and Friday will be technically bearish for next week.
• Day traders remain on the sidelines.