Gold Futures Contracts See Higher Volumes
Gold prices saw volatility earlier in the year because of worries over banks, such as the failure of Silicon Valley Bank, a U.S. regional bank catering to the technology sector, and the takeover of Credit Suisse by UBS, Patel says.
He notes volumes through August in the benchmark 100-ounce gold contract are up 4% versus a year ago, but the smaller gold products, such as the micro gold futures, which is one-tenth the size of the benchmark contract saw volumes increasing 32% through August. Likewise, the standard gold options contract is up 13% through August.
Gold futures prices have strengthened in 2023, remaining above $1,900 through early September after a surge earlier in the year.
Inflation Challenges for India
The WGC demand trends report also acknowledges the importance of the monsoon. “The success – or otherwise – of the monsoon season will also have a considerable bearing on demand for the remainder of the year,” the report states.
Rhind says Indian consumers may also be waiting to see if The Reserve Bank of India will cut interest rates. Much like the Federal Reserve and other western central banks, the RBI also raised interest rates to tame inflation. Inflation has tamped down on some Indian consumption as well, Cavatoni says.
Both Rhind and Cavatoni say factors to watch for Indian gold demand, aside from the monsoon’s strength, include consumers’ willingness to buy gold at current prices and also global monetary policy.
Rhind says historically when gold hits new highs, consumers have to adjust to those prices. “It's a question of how quickly they adjust to those prices in order to keep demand up there,” he says.
Cavatoni says once a clearer picture of U.S. monetary policy direction emerges, that could affect investors’ interest in gold. Yellow metal demand eased as the Fed and other central banks hiked interest rates with no sense of when the central banks would finish.
“That could be moving the price, which might impact overall demand, or the appetite for consumption in India,” Cavatoni says. “So you might have a ripe environment from a monsoon perspective, or maybe even an inflationary environment, but ultimately, that price might be something that puts a bit of a hindrance on consumption.”
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