Gold demand to be positive in second half of 2018, says WGC report

Gold demand is likely to be healthy in the second half of 2018 on positive global economic growth, trade wars and its impact on currency and rising inflation, the World Gold Council (WGC) said in a report.

Gold price rose by more than 4 per cent in the first few months of the year, only to finish in June down by the same amount and this downward trend continued during July as gold dropped almost an additional percentage point, WGC said in its mid-year outlook 2018 today.

While gold's volatility spiked in February and April, it has been moving in a relatively low range since, it added.

WGC said the gold's performance has been mainly driven by factors including a strengthening US dollar, higher investor threshold for headline risk and soft gold demand.

"At the same time, gold's price momentum and investor positioning in derivatives markets has accelerated its descent. We, however, believe that there may be reasons to be more optimistic during the second half of the year," it said.

According to the council, macroeconomic trends like positive but uneven global economic growth, trade wars and their impact on currency and rising inflation and an inverted yield curve will support gold in the second half of 2018.

In India, the second half of the year is usually positive for gold as the harvest and wedding seasons during the autumn provide seasonal support for the market.

The economic policies rolled out by the government to draw the informal, cash-based economy into the formal sector, according to the report, are starting to translate into stronger economic growth.