LONDON – Physical gold demand slumped by nearly a third in the three months to September, GFMS analysts at Thomson Reuters said on Thursday, as a rally in prices curbed jewelry buying in the key Chinese and Indian markets.
The net surplus in the gold market was at its highest since 2005, it said, as demand for gold-backed exchange-traded funds also weakened. Prices are expected to stabilize into the year-end, GFMS said, bottoming out at $1,240 an ounce. Next year it forecasts gold prices will average $1,420.
The U.S. election battle between Democrat Hillary Clinton and Republican Donald Trump, who go to the polls in November, has now overtaken Britain’s vote to leave the European Union as the key driver of gold buying, and consequently prices, it said.
“On balance, if Trump became President it would be likely to cause gold to rise above $1,400 and even $1,500 for the first time since April 2013,” it said. “However, a combination of scrap supply and weak demand might well cause such a rally to face strong headwinds.”
“Meanwhile, if Clinton wins then it is probable that some of the risk premium in the gold price at present would be lost in a kneejerk response, potentially causing a downward shift of around $50.”
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