Friday, 03 April 2015 07:01

Bullish Bets on Gold May Increase on Weak Emerging Markets

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Gold is expected to gain as emerging markets have not retreated even after the central banks increased interest rate.

Last month Central Banks of India, Turkey and South Africa raised interest rate to support their currencies and attract foreign funds. But these currencies are still depreciating. Since last week INR fell by 0.27% Turkey Lira down by 0.10% and South African Rand lose 0.29%.

Discouraging economic results of China and Fed tapering have already pulled out millions of dollars from emerging markets. According to IMF forecast China, world second largest economy, likely to grow at the rate of 7.5% and 7.3% in 2014 and 2015 respectively compare to present growth of 7.7%.

Gold has gained by 8.29% in last month compare to its 28% negative return last year. Equity markets of Asia fell on average of 2.9% last week. Bets on Gold and Silver have been increasing. Crude is the third commodity to have high bullish bets on.

It seems like interest rate hike didn support emerging economies but increased borrowing and holding cost of capital. At present physical buying at China has fell on Lunar New Year holidays but from next week we may see upward movement in haven assets.

This week there are important data releases of U.S. are in queue that may further drive precious metals. Gold spot gained by 0.13% to $1246.27 at international market at 0900 GMT.


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