Precious Metals Weekly
Group Economics Macro & Financial Markets Research
El Niño & Indian gold demand
Georgette Boele, tel,+31 20 6297789
4 June 2015 • • • • •
Weather related effects could impact farmer income and inflationary pressures in India Lower farmer income will probably result in lower gold demand… …while higher inflationary pressures could result in more gold demand as safe-haven asset The Reserve Bank of India will likely remain vigilant and might end its easing cycle… …therefore, it is likely that net-net gold demand will decrease in such an environment
What is the Indian monsoon?
gold demand could increase because of it being regarded as
The Indian monsoon primarily affects India and its surrounding
an inflation hedge and safe-have asset. The Reserve Bank of
water bodies. It blows from the northeast during cooler months
India is closely watching the development of the monsoon and
and reverses direction to blow from the southeast during the
its impact on inflation. It might end its easing cycle if inflation
warmest months of the year. This process brings large
pressures start to rise.
amounts of rainfall to the region during June and July. source: Britannica
Quarterly Indian consumer gold demand Metric tonnes
What is El Niño? El Niño is a natural phenomenon caused by unusually warm ocean temperatures in the Equatorial Pacific, that leads to significant deviations from normal weather patterns. In particular, El Niño can lead to a disturbance in rainfall patterns. The lead time between measured unusual water temperatures and disturbed weather patterns can be as long as one year. Among these consequences is increased rainfall across the southern tier of the US and in Peru, which has caused
400 350 300 250 200 150 100 50 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
destructive flooding, and drought in the West Pacific,
Consumer demand India
sometimes associated with devastating bush fires in Australia. Observations of conditions in the tropical Pacific are
Source: Thomson Reuters Datastream GFMS
considered essential for the prediction of short term (a few months to 1 year) climate variations. El Niño can be seen in measurements of the sea surface temperature. Source: National Oceanic and Atmospheric Administration (NOAA)
How do these weather effects impact Indian gold demand? The timely arrival of the monsoon in India (June-September), its distribution and quantity are critical to crop sowing during main summer growing season. Droughts could threaten sugar and cotton crops. The possibility of an El Niño weather
What can we conclude from all of the above? The occurrence of El Niño could lower gold demand for auspicious ceremonies and weddings. However, demand for gold for inflation-hedge and safe-haven could increase. We judge that the first effect is stronger so that net-net there will be temporary lower Indian gold demand.
ABN AMRO forecasts End period Gold Silver Platinum Palladium
04-Jun Close 14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 1,185 1,184 1,100 1,050 1,000 950 1,183 900 850 800 15.7 16.6 16.5 15.0 15.5 16.0 16.5 17.0 17.5 18.0 1,216 1,141 1,100 1,150 1,200 1,250 1,300 1,350 1,400 1,106 798 736 756 650 675 700 700 725 750 750
ceremonies and weddings resulting in lower demand for gold.
Average Gold Silver Platinum Palladium
Q1 15 1,218 16.7 1,194 786
On the other hand, weaker crops could have an upward effect
Source: ABN AMRO Group Economics
phenomenon occurring this year has attracted attention. El Niño conditions usually coincide with a period of a weak monsoon and rising temperatures in India. This could greatly damage agricultural crops in India. On the one hand, weaker crops could result in lower income for farmers. Therefore, there would be less money being available for auspicious
on agricultural prices. If agricultural prices were to rise sharply,
Q2 15 1,142 15.8 1,120 693
Q3 15 1,075 15.3 1,125 663
Q4 15 1,025 15.8 1,175 688
2015 Q1 16 Q2 16 Q3 16 Q4 16 1,115 975 925 875 825 15.9 16.3 16.8 17.3 17.8 1,154 1,225 1,275 1,325 1,375 707 700 713 738 750
2016 900 17.0 1,300 725
2
Precious Metals Weekly - El Ni単o & Indian gold demand
Precious metals Gold prices per troy ounces Gold price in USD Gold price in EUR Gold price in JPY Gold price in CHF Gold price in GBP Gold price in INR Gold price in CNY Gold price in BRL Gold price in RUB Gold price in TRY Silver prices per troy ounces Silver price in USD Silver price in EUR Platinum prices per troy ounces Platinum price in USD Platinum price in EUR Platinum price in JPY Platinum price in CNY Palladium prices per troy ounces Palladium price in USD Palladium price in EUR Palladium price in JPY Palladium price in CNY Palladium price in BRL Palladium price in INR Palladium price in RUB Gold forw ard rates LBMA 1 Month Gold Forw ard Offer rate BBA LIBOR USD 1 Month Gold 1 Month Lease rate LBMA 3 Month Gold Forw ard Offer rate BBA LIBOR USD 3 Month Gold 3 Month Lease rate Volatility 1 month gold option volatility 1 month silver option volatility 1 month platinum option volatility 1 month palladium option volatility COMEX & NYMEX positions NET LONGS - GOLD (COMEX) NET LONG ON SILVER (COMEX) NET LONG ON PLATINUM (NYMEX) NET LONG ON PALLADIUM (NYMEX) Total ETF positions Total Know n ETF Holdings of Gold Total Know n ETF Holdings of Silver Total Know n ETF Holdings of Platinum Total Know n ETF Holdings of Palladium Relative Gold/Silver ratio Gold/Platinum ratio Platinum/Palladium ratio Source: Bloomberg
Close
Change 1 Day in %
Change 5 days in %
Change YTD in %
1,183 1,042 146,725 1,099 767 75,855 7,334 3,707 65,193 3,197 Last 16 15 Last 1,106 974 137,120 6,856 Last 756 666 93,800 4,690 2,371 48,513 41,679 Last 0.07 0.18 0.12 0.10 0.28 0.18 Last 12.86 24.15 17.33 18.40 Last 109,720 61,502 31,529 17,811 Last 51,229,264 616,353,958 2,658,250 2,963,368 Last 71.84 1.07 1.46
-0.20 -0.86 -0.27 -0.59 -0.64 0.04 0.06 0.37 1.61 0.74 Change 1 Day in % -0.18 -0.99 Change 1 Day in % 0.16 -0.74 -0.16 0.36 Change 1 Day in % -0.30 -1.16 -0.58 -0.10 0.08 -0.24 1.29 Change 1 Day in % -27.78 0.98
-0.48 -4.20 -0.31 -2.12 -1.30 -0.01 -0.59 -1.65 3.93 1.15 Change 5 days in % -1.36 -5.00 Change 5 days in % -0.94 -4.65 -0.81 -1.06 Change 5 days in % -3.65 -7.28 -3.60 -3.90 -4.85 -3.32 0.40 Change 5 days in % -13.33 -0.81
-0.18 6.10 3.05 -6.94 0.53 1.03 -0.59 17.88 -1.71 15.10 Change YTD in % 4.84 11.76 Change YTD in % -9.07 -3.00 -5.82 -9.12 Change YTD in % -5.25 0.83 -2.18 -6.06 11.76 -4.03 -10.51 Change YTD in % 252.94 7.91
-13.64 -1.35
5.56 -2.50
0.00 9.04
Change 1 Day in % -2.45 1.42 0.03 0.19 Change net 5 days -22,614 -983 -320 329 Change net 5 days -314,476 584,587 -6,809 -6,321 Change 1 Day in % 0.13 -0.15 0.45
Change 5 days in % 6.64 1.04 2.59 0.03 Change net 1 Month 2,848 27,503 4,075 -312 Change net 1 Month -1,089,706 -9,363,362 -639 23,129 Change 5 days in % 0.87 0.50 2.81
Change YTD in % -25.53 -18.63 6.01 -14.94 Change net YTD 4,495 27,770 1,579 -4,207 Change net YTD -159,976 -6,756,890 -65,644 -103,522 Change YTD in % -5.04 9.46 -3.90
3
Precious Metals Weekly - El Niﾃｱo & Indian gold demand
Find out more about Group Economics at:https://insights.abnamro.nl/en/ This document has been prepared by ABN AMRO. It is solely intended to provide financial and general information on economics. The information in this document is strictly proprietary and is being supplied to you solely for your information. It may not (in whole or in part) be reproduced, distributed or passed to a third party or used for any other purposes than stated above. This document is informative in nature and does not constitute an offer of securities to the public, nor a solicitation to make such an offer. No reliance may be placed for any purposes whatsoever on the information, opinions, forecasts and assumptions contained in the document or on its completeness, accuracy or fairness. No representation or warranty, express or implied, is given by or on behalf of ABN AMRO, or any of its directors, officers, agents, affiliates, group companies, or employees as to the accuracy or completeness of the information contained in this document and no liability is accepted for any loss, arising, directly or indirectly, from any use of such n i formation. The views and opinions expressed herein may be subject to change at any given time and ABN AMRO is under no obligation to update the information contained in this document after the date thereof. Before investing in any product of ABN AMRO Bank N.V., you should obtain information on various financial and other risks and any possible restrictions that you and your investments activities may encounter under applicable laws and regulations. If, after reading this document, you consider investing in a product, you are advised to discuss such an investment with your relationship manager or personal advisor and check whether the relevant product 窶田onsidering the risks involved- is appropriate within your investment activities. The value of your investments may fluctuate. Past performance is no guarantee for future returns. ABN AMRO reserves the right to make amendments to this material. ﾂｩ Copyright 2015 ABN AMRO Bank N.V. and affiliated companies ("ABN AMRO").