Bank of America (NYSE:BAC) analysts said today that China could be a primary driver of gold demand in the years ahead, based on the opening up of their jewelry market and encouragement to invest in the precious metal.
“Along with the liberalization of the jewelry market, the (Chinese) government also focused on opening up the investment sector, allowing investment in gold,” Bank of America analysts said in a report. “China’s gold jewelry demand and retail investment will stay healthy in the coming years, which should provide continued support to the global gold market.”
Of course India will remain a strong consumer of gold in their jewelry market as well.
The thing that was odd to me in this report was the idea just because gold has dropped below moving averages that it somehow changes its role as a place of safety and protection against inflation.
Nothing has changed in the concerns over the sovereign debt issues threatening Europe, and these pressures are going to continue on no matter what happens.
So to me, this is probably more of a temporary correction which should offer a good time to acquire more gold and solidify one's position, rather than leave gold as a significant part of your investment portfolio.
Gold futures dropped to three-week lows after prices fell below their key moving averages.
Much of this seems to be connected to the announcement by the Reserve Bank of India to increase its interest rates, as well as the idea they will probably do it again at their next meeting in April.
The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com