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Gold: Safe Investment for the Long Haul

Gold: Safe Investment for the Long Haul

 
Increasing Wealth in Asia Will Continue to Fuel Demand">Increasing Wealth in Asia Will Continue to Fuel Demand
 
In the last decade, combined demand for gold from India and China has soared 71%. These two markets roughly account for 54% of consumer gold demand. Asia is now less economically dependent on the West and has shown relatively strong growth since the global financial crisis, despite persistently weak growth in the United States and Europe.
 
India has a strong tradition of investing in gold, primarily in jewelry. Demand mostly increases around the wedding and festive seasons, which begin from mid-to-late August and continue until January. Expenditure on gold can account for almost 30% of the total wedding cost. This gives a boost to local currency demand and raises gold prices.
 
In China, people view gold, whether in the form of bars, coins or jewelry, as a natural medium for savings and diversification. Gold is embedded in China’s culture, and the Chinese New Year and weddings are key events for the country’s gold consumption. While China’s middle class is expanding, India has a comparatively low level of per capita gold holdings. The powerful combination of increasing urbanization and strong cultural affinity for gold bodes well for the metal’s demand in both these countries.
 
U.S Markets Hold Promise
 
The United States delivered the strongest third quarter in the last five years, driven by economic growth, improving employment levels and growth in consumer confidence. Year to date, demand for jewelry has been up 4% to a seven-year high of 76.8 tons, consequently making the country the third largest jewelry market. Economic growth, improving employment levels and growth in consumer confidence will continue to sustain demand.