Gold demand in China and India – the world’s two leading centers for physical gold demand – is finally rising after two difficult years. China has seen a major slowdown in its industrial production and exports, causing a stock market crash there, along with a real estate bubble. This has cut down on disposable income.

But now we see the Chinese economy reaching a slower but steadier growth profile. India has enjoyed rapid economic growth – it is now the fastest-growing economy in the world – but gold has faced headwinds from a jewelers’ strike, high government tariffs and export restrictions, along with two years of weak monsoon rains. Thankfully, all three of India’s headwinds have turned in gold’s favor recently.

China has seen resumed gold buying from its central bank and retail customers alike. In an interview with Reuters, Roland Wang, managing director for China at the World Gold Council, said that total Chinese gold demand should be between 900 and 1000 metric tons this year and next year. In the domestic retail market, Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank, said that China’s gold demand was “particularly strong in September, rising 64% year-on-year.” The weak Chinese currency has encouraged investors to buy gold on its recent correction as they look for ways to diversify from China’s unstable stock market and real estate market. The yuan keeps declining, boosting gold in yuan terms.

China is the world’s biggest gold producer and consumer. China is also the world’s fifth largest holder of national central bank gold with 1,838 metric tons. The People’s Bank of China (PBOC) bought five metric tons of gold each month last quarter – July, August and September – costing over $600 million.

India, which fell from the #1 to #2 consumer of gold last year, didn’t buy much gold in the first half of 2016 due in part to a long strike by jewelers protesting high import duties last spring. But India’s historic love of gold never disappeared. It just went into temporary hibernation. Gold imports to India hit a nine-month high in October. This is partly due to an 8% price drop from the July highs, which came just in time for India’s peak wedding and festival seasons, when gold is considered an auspicious gift. James Jose, secretary of the Mumbai-based Association of Gold Refineries and Mints, said he expects India's October gold imports to reach 60-70 metric tons, the most since January, doubling September’s demand.

This combination of rising demand in China and India, plus gold ETF buying in America and the possible financial disruption of rising inflation and deficits amidst slow growth should help boost gold in 2017. 

Mike Fuljenz is a member of the Newsmax Finance Brain Trust.  He is also the editor of the NLG award winning Michael Fuljenz Metals Market Weekly Report.  Discover more by Clicking Here Now.