Interest rates, dollar level to decide gold demand: WGC

MUMBAI: Performance of financial markets, monetary policy in key economies including here, and the dollar movement will determine gold demand in 2019, the World Gold Council said in a report Thursday.

Since gold is considered a safe haven, during choppy markets, the demand for gold improves, normally. Emerging markets, led by India and China--the biggest consuming markets--make up 70 percent of consumer demand for the metal.

"We expect that many of the global dynamics seeded over the past two years and the risks that became apparent later in 2018 will carry over into 2019. And with them, we see a set of trends developing that will be the key in determining demand for gold. In turn, their interplay will be most relevant for the short and long term price behaviour of the yellow metal," WGC said in the report without putting a number to the likely growth rate.

The council expects increased market uncertainty and expansion of protectionist economic policies to make gold attractive as a hedge while it might face some hindrances from higher interest rates and a strong dollar. But the effects of these factors are expected to be limited as the US Fed has signalled a neutral stance going forward.

But as the market risks are likely to remain high, factors like higher interest rates and a strong dollar can cap the positive sentiment for the metal, it warned.

"Given its unequivocal link to wealth and economic expansion, we believe gold is well poised to benefit going forward. We also believe gold jewellery demand will strengthen in 2019, if the sentiment is positive and increase marginally if uncertainty remains," the report said.

Also, the marginal uptick in Western economies is expected to result in positive consumer sentiment, the report concluded.