Year to date, gold has been on an incredibly strong run overall. In fact, while the S&P 500 has generated gains in the amount of 2.4%, gold has outperformed the market with gains of around 3%. While the gold bugs are getting excited, the reality is that there’s one key factor missing. However, there may be a solution for that ahead that leads to a dramatic climb in the price of the precious metal.
Gold Bugs Are Getting Excited
Gold bugs have been overwhelmingly excited about the precious metal as of late with the recent gains and signals of further gains to come. At the moment, from an investor demand standpoint, everything seems to be coming together.
Strong inflation in the United States is is generally a buy signal for investors interested in gold. On top of that, we have a weaker USD leading to even more strength. While the Federal reserve is poised to increase rates, most believe that Trump’s stance on the dollar will lead to policy decisions that further weaken the greenback.
At the end of the day, this is all good news when it comes to the gold price. Continued signals that lead to strong investor demand, propping up the gold market is always going to be exciting to the enthusiasts surrounding the precious metal.
Demand For Physical Gold Will Play A Key Role
Nonetheless, there is one key thing missing here. In a recent interview with Kitco News, one thought leader in the gold industry brought the issue to our attention. Maxwell Gold, head of investment strategy at ETF Securities, pointed out in the interview that we need to see a resurgence in the demand for physical gold in both North America and critical emerging markets. Pointing out that “physical demand helps to provide ceiling and a floor for the market. Without that physical demand, investment demand just doesn’t get you to that new range.”
The Indian Wedding Season Could Lead To A Bullish Breakout
While Maxwell Gold believes that gold demand needs to climb in the North American and emerging markets to see a breakout, some believe that the climb in demand that’s likely just around the corner out of both India and China will lead to the breakout, even if North American demand for physical gold remains relatively flat.
In September, the wedding season in India will begin. India is one of the world’s largest consumers of gold and the wedding season is where. One thing that Indian weddings need a ton of is gold as it is a key aspect of design in the traditional wedding in the region.
As the wedding season in India comes to a close, the New Year in China will be upon the market. This is another season that comes with intense gold buying, in this particular case, in the form of gifts in general. At the end of the day, this demand from China and India for physical gold could be just what the market needs to break that critical $1,400 per ounce barrier.
Pay Close Attention To The Price Of Gold In The Months Ahead
In the months ahead, the price of gold could see a monumental rise. The gains will largely depend on whether or not we see continuing growth in inflation, continuing weakness in the USD, and growth in demand for physical gold. If all three of these things come together, gold could be in line for a bullish breakout!