Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Indian Surge in Gold Demand due to the 'Wealth Effect'

Commodities / Gold & Silver Jan 17, 2008 - 11:22 AM GMT

By: Gold_Investments

Commodities Gold continued to sell off yesterday and was down $19.70 to $880.90 per ounce at the close in New York yesterday and silver was down 42 cents to $15.78 per ounce. Normally sell offs are quite sharp and last some 2 to 4 days and therefore some follow through selling may be witnessed. However, the strong fundamentals should result in gold being well supported at previous resistance at $850.


Recession fears are deepening as the outlook has clearly deteriorated and even the most sanguine bulls have admitted that. The Federal Reserve cutting interest rates in order to attempt to ease the credit crisis and prevent a deeper recession while inflation remains strong is very gold bullish. Especially given the tight supply/demand situation and decreasing mine supply internationally.

Gold's sell off has not continued in Asian and early European trading and the London AM Fix was at $881.50 (up from $881.00 the previous day). At the London AM Fix gold was trading at £448.40 (down from £450.20 yesterday) and €603.40 (down from €609.05 yesterday).

Indian Gold Demand
India remains the world's largest importer of gold and continues to show a healthy appetite for physical gold. Although demand has slowed in last quarter of 2007 it is important to remember that this fall is from all time record highs. Demand has increased dramatically in recent years and the increase in demand could not continue ad infinitum.

Gold is a huge part of Indian marriage rituals as wealth in the form of dowries is usually given to the brides in the form of beautiful gold jewellery. While in the western world we have in modern times separated and distinguished between gold in the form of jewellery from investment grade gold in the form of bullion coins or bars, in India jewellery often serves as an investment and as a form of savings. Especially as financial institutions in India have not been known for their credit worthiness or financial stability and the rupee has up until recently been a very weak and constantly devalued currency.

The ‘wealth effect' in India is of importance. The rupee continues to strengthen against most currencies but especially the dollar and the economy is booming with strong gains in property and stock markets. Thus India's ability to remain a leading importer of gold has strengthened due to this huge increase in wealth in recent years.

Assertions that slowing gold demand in India will lead to a fall in gold prices will again be seen as erroneous. Indian gold demand is just one of many fundamental factors driving the gold market today. Geopolitical and more importantly macroeconomic risk are the fundamental drivers of the gold market today. There is an increasing likelihood of deflation and stagflation in many major economies and in the global economy and this is leading to huge safe haven investment demand for gold. This is clearly shown in the massive growth in the gold holdings of gold ETFs internationally.

Any decline in Indian gold demand is likely to be more than made up for in investment demand internationally and also from Chinese gold demand which is tiny when compared to demand from the subcontinent. The Chinese gold market was only recently liberalised and Chinese people can now own gold for the first time since before World War II. Thus Chinese demand is increasing significantly and it is likely to increase exponentially.

It is important to remember that similar predictions of slowing Indian demand creating a top in the gold price were spoken of when gold reached $500, $600 and $700 per ounce. While Indian buyers are more price sensitive than many gold buyers they have readjusted to higher prices in recent years and demand has continued to increase in recent years despite the surging gold price. Thus, they are likely to become buyers again on any dips in the gold price and should thus provide an important foundation or floor to the gold price on corrections.

FX
Dovish comments from ECB members weighed on the euro across the board yesterday. The single currency fell against the Greenback from a high of 1.4860 to a low of 1.4590. The 1.4570 level should prove to be supportive with a breach of this level setting up a retracement to the December low of 1.4310.

Against sterling the euro does appear to be in a corrective phase as predicted after its recent aggressive move up to the recent high of 0.7613. Currently this currency pair is trading at the 38.2% Fibonacci retracement level at 0.7421 and could find support here ahead of the next assault attempt at 0.7700.

Traders took the opportunity to book profits in USD/JPY as it traded below 106.00 for the first time since the middle of 2005 and this took USD/JPY back up to 108.00. This rally could prove to be short lived and a move back below 107.40 could set up the next move lower targeting 102.00 over the medium term. This coupled with the weakness towards the euro will surely weigh on EUR/JPY and this currency pair looks also set to move lower over the short to medium term.

Support and Resistance

Support is at yesterday's low of $875 and should we breach that, there is further support at $860 and then there should be strong support in the $840 to $850 range which was previous resistance.
Gold is likely to remain above $840 and given the macroeconomic climate, $1000 will be reached sooner than many market participants expect.

Silver
Silver is trading at $15.79/$15.81 at 1200 GMT and it has also consolidated near the lows from the New York close yesterday. Support is at $15.70 which may be breached and below that at $15.30 and $15.00. Silver will remain volatile as ever but the long term fundamentals remain very sound. Predictions of an significant increase in mining supply in the short term are likely to prove erroneous.

PGMs
Platinum was trading at $1560/1566 as per above (1200 GMT).
Palladium was trading at $369/374 an ounce (1200 GMT).

Oil
Oil is largely flat in European trading after yesterday's flat day and NYMEX light sweet crude oil (FEB08) was trading at $90.87 a barrel.

Gold Investments
63 Fitzwilliam Square
Dublin 2
Ireland
Ph +353 1 6325010
Fax  +353 1 6619664
Email info@gold.ie
Web www.gold.ie
Gold Investments
Tower 42, Level 7
25 Old Broad Street
London
EC2N 1HN
United Kingdom
Ph +44 (0) 207 0604653
Fax +44 (0) 207 8770708
Email info@goldinvestments.org
Web www.goldinvestments.org

Mission Statement
Gold and Silver Investments Limited hope to inform our clientele of important financial and economic developments and thus help our clientele and prospective clientele understand our rapidly changing global economy and the implications for their livelihoods and wealth.
We focus on the medium and long term global macroeconomic trends and how they pertain to the precious metal markets and our clienteles savings, investments and livelihoods. We emphasise prudence, safety and security as they are of paramount importance in the preservation of wealth.

Financial Regulation: Gold & Silver Investments Limited trading as Gold Investments is regulated by the Financial Regulator as a multi-agency intermediary. Our Financial Regulator Reference Number is 39656. Gold Investments is registered in the Companies Registration Office under Company number 377252 . Registered for VAT under number 6397252A . Codes of Conduct are imposed by the Financial Regulator and can be accessed at www.financialregulator.ie or from the Financial Regulator at PO Box 9138, College Green, Dublin 2, Ireland. Property, Commodities and Precious Metals are not regulated by the Financial Regulator

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. Past experience is not necessarily a guide to future performance.

All the opinions expressed herein are solely those of Gold & Silver Investments Limited and not those of the Perth Mint. They do not reflect the views of the Perth Mint and the Perth Mint accepts no legal liability or responsibility for any claims made or opinions expressed herein.

Fair Use Notice: This newsletter contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of issues of financial and economic significance. At all times we credit and attribute the copywrite owner and publication.
We believe this constitutes a 'fair use' of any such copyrighted material as provided for in Copyright Law. The material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for economic research purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.

Gold Investments Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in