11 Catalysts for a 2nd-Half Gold Rebound

On a year-to-date basis, the yellow metal remains in positive territory by only 0.6% – and more than 12% below its high this year of $1,792.30, reached on February 29th.  However, going forward there are many reasons to remain optimistic, according to analysts at Nomura.

In a recent report, Nomura laid out the following 11 reasons why gold prices are likely to rebound in the second half of 2012.

1. Third quarter is a seasonally strong quarter for Indian demand. Nomura expects Indian rupee to stabalise in the short term and grow stronger over the next two years, which will aid in pick-up of gold demand.
2. Despite the erosion of Indian volume (19 per cent drop in jewellery and 46 per cent lower in investment), gold prices have held on admirably. Any pick up in Indian demand can take the prices higher.
3. Exceptionally strong demand from China will support strong gold prices.
4. Scrap gold supply has slowed down.
5. New mine capacity addition will not be sufficient to meet the spike in demand.
6. Increasing gold holding by central banks. Despite the recent buying gold holdings as a percentage of central banks reserves are at historical lows.
7. Persisting negative real interest rates will result in investors diverting their saving to gold
8. Prospect of further monetary easing in Euro and US
9. Continued pressures on the peripheral euro zone countries and banking systems are likely to see physical bar investment.
10. Structural changes of the world reserve currency structure.
11. Peak in Chinese foreign exchange reserves.