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Dr. North on Gold
Chessman
Posts: 1,602 ✭✭✭
http://www.garynorth.com/members/11942.cfm
"Gold has been in a trading range of $1,200 to $1,400 for almost a year. It is now in the low $1,200s.
I always begin with a considering of demand in India. This is the gold market as far as I am concerned.
Headline: Smuggling of gold increases as Indian govt imposes restrictions
The greater buying of the precious metal has dealt a blow to India's economy by increasing the flow of money out of country compared to inflows.
With India's wedding season in full swing, the glass sales counters in Mumbai's famed Zhaveri gold bazaars are crowded with customers eyeing elaborate headpieces, nose rings and necklaces. No one does jewelry quite like an Indian bride, who by tradition wears all the gold she can stand up in and her family can afford.
These days, though, even the most ambitious bridal budgets don't bring the bling like they used to, thanks to hikes in import duties and a rise in local gold prices that have shoppers like Rajanikant Mehta grumbling.
Mehta, who owns a factory outside the capital, had planned to spend about 100,000 rupees ($1,800) on a necklace for the woman marrying his son late this month, but he's unhappy about what he's getting for his money. Gold prices in India, which imports nearly all its gold, have risen 50 per cent over the past three years to about 87,000 rupees, or about $1,400, an ounce.
Thanks to the new tax and weaker rupee, that's about a 20 per cent premium over the world market price, hovering just under $1,200 an ounce.
"The price of gold should be lower," Mehta complained. "This is a globalised world. If the prices are similar to the prices elsewhere, then the purchase of gold will increase." More gold-buying, though, is exactly what the Indian government is trying to stop by raising import duties three times this year to 10 per cent on gold bullion -- up from 2 per cent in January -- and 15 per cent on gold jewellery. Gold is India's second-biggest import behind oil, and purchases have soared in recent years as rising incomes from a decade of economic growth sent Indian consumers on a buying streak.
The following statement needs evidence.
The problem is that the greater buying of the precious metal has dealt a blow to India's economy by increasing the flow of money out of country compared to inflows. As a result, the current account deficit rose to a historic high of 4.8 per cent of India's gross domestic product in the fiscal year that ended in March.
That in turn has helped weaken the rupee by about 10 per cent this year, making many products more expensive by raising the cost of oil, priced in dollars, and other raw materials.
It asserts cause and effect: from gold purchases to the balance of payments deficit. I think it is more likely the other way around. Indians can see what is happening: a falling rupee. They buy gold to protect themselves and their daughters.
This is surely true: "But in trying to discourage gold-buying, India is taking on a passion that dates back thousands of years and is deeply entwined in Indian culture."
Still, the tax measures appear to have worked, with gold imports down 32 per cent in the July-September quarter and India on track to lose its status as the world's No. 1 consumer of gold to China this year. The drop has eased pressure on the current account deficit, now on track to reach a more comfortable annual average of 3 per cent of GDP. The government hasn't said what it plans to do with the extra revenue, but the country faces a big fiscal deficit, so every bit helps.
India is Keynesian. The politicians hate gold.
Smuggling is increasing, of course. "Going by the number of seizures that have been made at airports and elsewhere, there is enough evidence to say that smuggling probably has doubled this year," said Somasundaram, India's director for the World Gold Council.
Despite the steps to limit imports, India's demand for gold remains robust. It's plainly evident during wedding season, which runs from November through January. The custom of adorning brides with gold is both spiritual -- gold is a powerful symbol of purity -- and practical. The wife's wedding adornments belong to her as insurance against a bad marriage, even though many men confiscate it.
In the southern state of Kerala, the escalation of bridal jewellery extravagance is so dramatic that the local women's commission has even proposed a law limiting how much a bride can wear -- a measure bound to meet popular opposition.
"Everyone likes gold. Marriage happens just once in your life," Abhirami Damodaran said as she shopped for her wedding jewellery. The daughter of a real estate businessman in Kerala, she plans to flaunt a whopping 3.2 kilograms of gold worth about Rs9.6 million, or $150,000, on her big day.
"When we wear gold, it's not only the bride who is happy, but her parents as well," she said. "They are giving gold as part of a future investment."
India is the future. China is the future. In both nations, faith in digital currency is limited. Faith in gold remains high. This will not change.
With gold at $1,200, it's a buy. Buy bullion gold coins for long-term investments.
"Most people will not buy when a commodity has fallen in price. They prefer to buy when it is rising. I think it's wiser to buy gold when it has not been rising."
Is this a good analysis in what was one of the worse years for precious metals?
"Gold has been in a trading range of $1,200 to $1,400 for almost a year. It is now in the low $1,200s.
I always begin with a considering of demand in India. This is the gold market as far as I am concerned.
Headline: Smuggling of gold increases as Indian govt imposes restrictions
The greater buying of the precious metal has dealt a blow to India's economy by increasing the flow of money out of country compared to inflows.
With India's wedding season in full swing, the glass sales counters in Mumbai's famed Zhaveri gold bazaars are crowded with customers eyeing elaborate headpieces, nose rings and necklaces. No one does jewelry quite like an Indian bride, who by tradition wears all the gold she can stand up in and her family can afford.
These days, though, even the most ambitious bridal budgets don't bring the bling like they used to, thanks to hikes in import duties and a rise in local gold prices that have shoppers like Rajanikant Mehta grumbling.
Mehta, who owns a factory outside the capital, had planned to spend about 100,000 rupees ($1,800) on a necklace for the woman marrying his son late this month, but he's unhappy about what he's getting for his money. Gold prices in India, which imports nearly all its gold, have risen 50 per cent over the past three years to about 87,000 rupees, or about $1,400, an ounce.
Thanks to the new tax and weaker rupee, that's about a 20 per cent premium over the world market price, hovering just under $1,200 an ounce.
"The price of gold should be lower," Mehta complained. "This is a globalised world. If the prices are similar to the prices elsewhere, then the purchase of gold will increase." More gold-buying, though, is exactly what the Indian government is trying to stop by raising import duties three times this year to 10 per cent on gold bullion -- up from 2 per cent in January -- and 15 per cent on gold jewellery. Gold is India's second-biggest import behind oil, and purchases have soared in recent years as rising incomes from a decade of economic growth sent Indian consumers on a buying streak.
The following statement needs evidence.
The problem is that the greater buying of the precious metal has dealt a blow to India's economy by increasing the flow of money out of country compared to inflows. As a result, the current account deficit rose to a historic high of 4.8 per cent of India's gross domestic product in the fiscal year that ended in March.
That in turn has helped weaken the rupee by about 10 per cent this year, making many products more expensive by raising the cost of oil, priced in dollars, and other raw materials.
It asserts cause and effect: from gold purchases to the balance of payments deficit. I think it is more likely the other way around. Indians can see what is happening: a falling rupee. They buy gold to protect themselves and their daughters.
This is surely true: "But in trying to discourage gold-buying, India is taking on a passion that dates back thousands of years and is deeply entwined in Indian culture."
Still, the tax measures appear to have worked, with gold imports down 32 per cent in the July-September quarter and India on track to lose its status as the world's No. 1 consumer of gold to China this year. The drop has eased pressure on the current account deficit, now on track to reach a more comfortable annual average of 3 per cent of GDP. The government hasn't said what it plans to do with the extra revenue, but the country faces a big fiscal deficit, so every bit helps.
India is Keynesian. The politicians hate gold.
Smuggling is increasing, of course. "Going by the number of seizures that have been made at airports and elsewhere, there is enough evidence to say that smuggling probably has doubled this year," said Somasundaram, India's director for the World Gold Council.
Despite the steps to limit imports, India's demand for gold remains robust. It's plainly evident during wedding season, which runs from November through January. The custom of adorning brides with gold is both spiritual -- gold is a powerful symbol of purity -- and practical. The wife's wedding adornments belong to her as insurance against a bad marriage, even though many men confiscate it.
In the southern state of Kerala, the escalation of bridal jewellery extravagance is so dramatic that the local women's commission has even proposed a law limiting how much a bride can wear -- a measure bound to meet popular opposition.
"Everyone likes gold. Marriage happens just once in your life," Abhirami Damodaran said as she shopped for her wedding jewellery. The daughter of a real estate businessman in Kerala, she plans to flaunt a whopping 3.2 kilograms of gold worth about Rs9.6 million, or $150,000, on her big day.
"When we wear gold, it's not only the bride who is happy, but her parents as well," she said. "They are giving gold as part of a future investment."
India is the future. China is the future. In both nations, faith in digital currency is limited. Faith in gold remains high. This will not change.
With gold at $1,200, it's a buy. Buy bullion gold coins for long-term investments.
"Most people will not buy when a commodity has fallen in price. They prefer to buy when it is rising. I think it's wiser to buy gold when it has not been rising."
Is this a good analysis in what was one of the worse years for precious metals?
0
Comments
Are they really this stupid, or are they destroying the dollar on purpose?
<< <i>
<< <i>While 2013 was not a banner year for gold, gold has provided an annualized return of 13% since 2000. And this includes the not so banner year of 2013. >>
True. But since 1980, it has provided an annualized return of about 1%. >>
I didn't start buying until 2000.
Are they really this stupid, or are they destroying the dollar on purpose?
<< <i>
<< <i>While 2013 was not a banner year for gold, gold has provided an annualized return of 13% since 2000. And this includes the not so banner year of 2013. >>
True. But since 1980, it has provided an annualized return of about 1%. >>
Measured in what? If the answer is fiat dollars is that accounting for inflation or not? Who's measure of inflation ? Fed inflation or real world inflation?
Gold is the yard stick . Dollars are broken
They ask me how can I smile at the current price. I say" because I bought and sold it all the way up and back down to its current levels, never sitting on it.
jim
They kept a stackin, I kept a sellin.
<< <i>I have so many customers sitting in 1600-1800 gold, many just feel like sitting down an crying.
They ask me how can I smile at the current price. I say" because I bought and sold it all the way up and back down to its current levels, never sitting on it.
jim
They kept a stackin, I kept a sellin. >>
I feel bad for those who bought and held at those levels. At least they'll have a big profit a few years down the road when gold's at $3,000.
I knew it would happen.
Honest Money: Biblical Principles of Money and Banking
Crossed Fingers: How the Liberals Captured the Presbyterian Church
Unconditional Surrender: God's Program for Victory
Leviticus: An Economic Commentary
Honest Money: The Biblical Blueprint for Money and Banking
Yeah, I care what he thinks about anything.
--Severian the Lame
<< <i>Gary North's Vitae:
Honest Money: Biblical Principles of Money and Banking
Crossed Fingers: How the Liberals Captured the Presbyterian Church
Unconditional Surrender: God's Program for Victory
Leviticus: An Economic Commentary
Honest Money: The Biblical Blueprint for Money and Banking
Yeah, I care what he thinks about anything. >>
A most disappointing, self-admittedly apathetic post by someone I imagine shares very similar economic values and diligent work ethic as North, but never even engaged the argument (probably never even read a book of his - and you forgot at least 30 more I can think of - you would likely be surprised).