Gold gets seasonal boost

Photo: Investing in Gold

Demand for gold has received a seasonal boost this month, despite an overall decline in value and investment.

As Diwali approaches, demand from India has risen, as is tradition during this time of year. Indeed, the Indian wedding season also runs in the final quarter of the year, which also fuels physical demand for the precious metal.

Gold, though, continues to face headwinds from the US economy, as the Federal Reserve intends to hike interest rates on the back of the strong dollar and overall economic recovery. The latest Fed meeting did not raise rates, but indicated that it still might happen in December, which, combined with the downbeat figures from the European Central bank, has helped to push up the dollar - and, conversely, pushed down gold.

Market Realist notes that discounts for gold climbed at the end of October, spurred by speculation surrounding the Fed meeting. But while India is also a factor in rising demand, the low pricing helped to stimulate sales too. Will the short-term boost translate into a longer trend, or merely stall an ongoing decline? A lot of that will depend on what the US Federal Reserve decides next month.

"There is still no end in sight for the falling prices of gold," Fawad Razaqzada, technical analyst at Forex.com, tells MarketWatch.

"The markets have since been pricing in a higher probability for a rate rise in December and the dollar has correspondingly gained ground."