NEW DELHI: Economic reforms are expected to drive up gold demand in the country in 2018, feels Alistair Hewitt, Director for Market Intelligence with the World Gold Council.

In an interview to business news channel BTVI, Hewitt said economic reform policies will lead to a “rise in incomes, people will ultimately be better off as a result... The economic analysis we have done shows that rising wealth in India correlates with rise in demand”.

“Over the longer term as these policies affect the rate of economic growth, we feel there will be a positive impact on Indian gold demand,” he said.

Talking about global demand for gold from the industrial sector, he said 2017 was turnaround year in terms of the industrial sector after witnessing a downward trend during 2010-2016.

“When we speak to people in the industry, they are quite optimistic. The use of gold in industrial products is on the increase,” Hewitt said.

Currently, gold as a metal is used in smart phones, electric vehicles and many other emerging technologies, and is expected to ultimately play a role in solar panels in the years to come. Meanwhile, gold prices rose half a per cent on Friday as the dollar laboured near a three-year low amid heightened fears of a U.S. government shutdown, but the precious metal was still on track for its first weekly drop in six.

The US dollar fell versus a basket of currencies after legislation to stave off an imminent federal government shutdown encountered obstacles in the Senate late on Thursday. A weak dollar makes dollar-priced gold cheaper for non-US investors. Spot gold was up 0.5 per cent at $1,333.51 an ounce at 1458 GMT, on track for a weekly drop of 0.3 percent, having fallen from four-month highs hit on Monday.

Expectations

US gold futures were up 0.5 percent at $1,333.90. Capping gains in gold, bond yields have been rising this week on expectations that strong economic data globally will encourage the US Federal Reserve to press ahead with monetary tightening.

Expectations of rising interest rates tend to lift bond yields, reducing the appeal of holding non-yielding bullion while at the same time boosting the dollar, in which gold is priced. “It all depends on the direction of the dollar and our forex strategists expect a dollar rebound as a result of rate hikes so gold should pare some of its gains,” said Commerzbank analyst Carsten Fritsch.

The Fed should raise interest rates three to four times in both 2018 and 2019, Cleveland Fed President Loretta Mester said on Thursday, a pace slightly faster than many of her fellow policymakers prefer. “The overall run in gold has been overdone. The overall weakness in US dollar is over ... I can’t be more cautious on gold prices at the moment,” said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.

“The fundamentals remain the same with the large trading range remaining intact at $1,200 to $1,400, with no major change in global political tensions or rate hike outlook,” To said. Spot gold is still targeting $1,311 per ounce, as suggested by a small double-top and a Fibonacci retracement analysis, according to Reuters technical analyst Wang Tao.

Agencies