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Do you honestly believe that Indians outweigh institutional investors?

 

I don't just believe it. It is a provable fact. Indian demand accounts for half of jewelry demand. Jewelry demand uses 65% of the gold mined each year. Investment typically uses 15% total. A few minutes with Google will allow you check this. Many commentators in the West are totally blind to this, dazzled by the huge volume of trade in paper gold. But no-one ever takes delivery of this. Indians take delivery.

 

 

 

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The India jewelry demand story just cracks me up. One week I have this image of thousands of Indians walking past jewelry shops turning there noses up and the next an image of masses of them running into shops in the same manner as they squeeze onto public transport. What to believe hey?

 

Last week they weren't buying - the price in Roubles was too high. Now they are back in time for Diwali to take advantage of the drops. If the price goes up again, they will stop buying again. After Diwali, demand will drop too, unless the price comes down.

 

Of course it probably just coincidence that I called fair value yesterday, and this news of Indian demand pick up was released today, and the price is going up now. The Indians buy 800 tons of physical every year. Other jewelry accounts for another 800 tons. Total mine output is 2,500 tons. The remaining 900 tons is split between industry, dentistry and Western investors.

 

 

 

 

 

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For example, the total gold held in physical ETFs amounts to around 1,000 tons. This has accumulated over several years. BV and GM hold around 10-20 tons each, around 2 days mine production. Mints generally make around 30,000 coins a year, or 1 ton.

 

Eastern jewelry uses 1,600 tons, each and every year, for some time now.

 

 

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I don't just believe it. It is a provable fact. Indian demand accounts for half of jewelry demand. Jewelry demand uses 65% of the gold mined each year. Investment typically uses 15% total. A few minutes with Google will allow you check this. Many commentators in the West are totally blind to this, dazzled by the huge volume of trade in paper gold. But no-one ever takes delivery of this. Indians take delivery.

It's important that Indians take delivery, but it is even more important that annual gold production is only a small fraction of the global gold stock. This is the characteristic of a commodity used as money: actual production/reduction is marginal. I don't think that it mattered much what India did between 1974 and 1980.

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It's important that Indians take delivery, but it is even more important that annual gold production is only a small fraction of the global gold stock.

 

About 2.5% at the moment. Small, but not tiny, I would say. But at the end of the day, the spot price of gold is what these miners can get for their products. Someone has to buy all this new gold, or the price will plummet.

 

 

This is the characteristic of a commodity used as money: actual production/reduction is marginal. I don't think that it mattered much what India did between 1974 and 1980.

 

It does matter, because it means that rural Indians own a huge chunk of the above ground gold. 1,000s of tons, more than all the western central banks put together. This has been largely accumulated at much lower prices than today. So the "gold as money" theory has to content with the fact that the global economy will be in the hands of Indian farmers, and the market has to factor in the mountain of gold that would be unleashed by higher prices. People buy gold for a rainy day. We have rainy days ahead. People will want to cash in their insurance.

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We'll see. Gold is now very volatile. Fundamentally I still see better chances of $3,000 than $300 over the medium term.

And the money will come from where? Why the interest in the nominal value? Does your gold by the same amount of oil, wheat, sugar, land, etc as it always has?

Deep irony.

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For example, the total gold held in physical ETFs amounts to around 1,000 tons. This has accumulated over several years. BV and GM hold around 10-20 tons each, around 2 days mine production. Mints generally make around 30,000 coins a year, or 1 ton.

 

Eastern jewelry uses 1,600 tons, each and every year, for some time now.

 

I should add, the bigger mints (US for example) may produce 10 tons of coins a year, but it is still "lost in the noise" of the jewelry market

 

 

 

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Last week they weren't buying - the price in Roubles was too high. Now they are back in time for Diwali to take advantage of the drops. If the price goes up again, they will stop buying again. After Diwali, demand will drop too, unless the price comes down.

 

Maybe they should have bought in in Rupees then? :P

 

 

 

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And the money will come from where? Why the interest in the nominal value? Does your gold by the same amount of oil, wheat, sugar, land, etc as it always has?

Deep irony.

Gold is holding up pretty well, the Dow and houses still look like awful turds in terms of gold.

 

I have always been interested in the fair nominal price of gold given current M3 levels. Most estimates are north of $10,000.

 

Regarding money, they produce arbitrary amounts of it at the moment. So, watch out.

 

I wish you good luck with US Treasuries and Federal Reserve Notes. ;)

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:lol:

 

No. Indian farmers are big on the rouble carry trade.

 

People will want to cash in their insurance.

:unsure::P

 

 

I think they already were burned earlier this year carry trading their useless metal insurance for higher returns on the Sensex

 

 

Indians Selling Gold To Buy Stocks

 

 

http://www.marketoracle.co.uk/Article3411.html

 

India will not escape that trend because, in spite of all of India's venerable gold-buying tradition, the worldwide fiat/debt-economy is hard-wired into the Indian (non-gold) financial system.

 

The same trick once pulled on world wide gold holders by the US Fed under Paul Volcker is now being pulled on India's poor and middle class: by the siren call of "higher returns" they are suckered into foregoing their reliable gold savings in favor of questionable paper-promises Volcker did it by raising US bond yields sky-high in 1979. India is doing it by raising potential stock market profits to the point where gold owners "just can't resist" anymore.

 

Unfortunately, India's prodigious gold wealth will be bought up by its economic competitor, China, whose government tells its subjects that buying gold is a good thing to do. I'm sure there'll be some Arab buyers, too, as well as a few American investors who are only now slowly waking up to the scam - and who will soon have nowhere to go except toward gold in their wealth preservation efforts.

 

China has just passed the US as the world's second largest gold importer. India's longstanding record of being first in that category will fall victim to China's acquisitiveness very soon, if the current trend continues.

 

It's the same old story: India's new upper caste of newly rich debt-peddlers, a/k/a financial institutions, are skimming the wealth of the middle and lower classes. (Who knows? They might also be the ones buying the poor people's gold at lower prices!) Then, when the bust inevitably comes, the poor get left holding the bag while the elites get the first use of the printed money. Unfortunately, under the most likely scenario, China gets to hold all of the the gold.

The trend of Indian gold-selling and stock buying will have a mediate-term negative effect on world gold prices. Profit starved western mutual funds will dump their gold shares and gold futures. The price will drop. Skittish gold investors will sell their all-too precious metal, the world's top financiers (the ones who are actively rigging the markets for their benefit) and Chinese subjects and industrialists will get another chance at buying it at fire-sale prices, and everything will go on as before.

 

Except for one thing, that is: Members of India's poor and middle classes will be trying to bite their own rear ends off when they realize the huge mistake they have made.

 

Prognosis:

 

1. Gold prices will drop as a result of Indians' selling their inheritance to buy stocks;

2. They will fall all the way back to the $700 level, shaking out lots of stupid gold investors and traders;

3. The world will continue down its US-led path to economic self-destruction. At some point, western stock investors will realize there is no place left to put their remaining and dwindling funds - except into gold;

4. The gold price will rise again; newly paper-bound Indians and other investors will watch it rise, waiting for the "right time" to get back into gold;

5. By the time they get back in, their illusory stock market gains will have largely evaporated and gold will be back up to or near $900 per ounce again, robbing them of the fruits their misguided and misinformed attempt to wait for lower gold prices;

 

I remember when gold hit $600 an ounce a couple of years ago. A daughter of a local Indian jeweler told me that gold was "too expensive" and that the Indian jewelers were all waiting for lower prices.

 

Gold promptly shot up to $700, then dropped back to just under $600, stayed there for awhile, and now it's at $900 - and the story repeats itself. The gold dealers who were waiting for lower prices literally shafted themselves. Now, they are doing it again.

 

The bottom line? Indians will pay a high price for letting illusory paper gains bamboozle them into selling gold for stocks.

 

 

Lesson Learned?

 

Notice the date of the article

 

Jan 18, 2008

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I think they already were burned earlier this year carry trading their useless metal insurance for higher returns on the Sensex

 

Indians Selling Gold To Buy Stocks

 

http://www.marketoracle.co.uk/Article3411.html

 

Lesson Learned?

 

Notice the date of the article

 

Jan 18, 2008

Indeed an oracle!

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Nice +$50 run-up.

 

 

Just based on jewelry, I would guess that $800 is very likely, $850 possible, but I would be surprised to see $900 (barring a slump in the dollar). But then back down again to $700ish by middle of December.

 

 

Just a guess, I wouldn't trade it in these volatile markets, but it will be interesting to see.

 

 

 

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About 2.5% at the moment. Small, but not tiny, I would say. But at the end of the day, the spot price of gold is what these miners can get for their products. Someone has to buy all this new gold, or the price will plummet.

 

Well, it should be... but it's not. The spot price of gold is determined on global paper trading markets like LME and COMEX.

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About 2.5% at the moment. Small, but not tiny, I would say. But at the end of the day, the spot price of gold is what these miners can get for their products. Someone has to buy all this new gold, or the price will plummet.

Do you have a good source to back up that specific 2.5% figure?

 

On another matter it seems that global production has been dropping since 2003 in spite of dollar rising prices. I wonder why?

 

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