India election

RedTiger

India is #1 or #2 in terms of retail gold demand. Narendra Modi's BJP party won a sweeping landslide on a platform of pro-business, pro-growth. The India stock market is up about 15% this week on the election news (EPI is one of several India etfs). If Modi can deliver on a fraction of his promises, this will be bullish for gold. The outgoing socialist Ghandi-Nehru legacy party that has dominated India's politics for most of modern times, imposed heavy tariffs on gold imports, and would have likely continued to increase the gold tariffs.

India has lagged far behind China in terms of economic growth. That divergence is one reason many voted for the BJP. The people in India saw China continuing to grow while their economy was for the most part stagnant.

MGLICKER

India has been slumping of late. This certainly could boost gold demand, as well as silver in an industrial sense.

miklia

Modi's reforms, if implemented as he promises, would be more likely to reduce gold demand in India as investors put their money in local projects, real estate, etc....most in India buy gold to protect against a weak and fragile economy, not extracting from the profits of a strong and robust one.

Silveraholic

<< <i>Modi's reforms, if implemented as he promises, would be more likely to reduce gold demand in India as investors put their money in local projects, real estate, etc....most in India buy gold to protect against a weak and fragile economy, not extracting from the profits of a strong and robust one. >>



It's my understanding that India has a cultural and religious affinity for gold that goes back centuries. Protecting from a weak economy in not one of the main reason people crave gold in India.

miklia

that's right Silveraholic, but it's usually been used to protect from unreliable local political and economic dynamics, as is the case in many countries. A big part of Modi's promise is to, in effect, make India a more reliable country to do business in, which would encourage domestic investment in things other than gold or silver. Demand won't drop overnight - everyone from banks to car dealers in India still offer gold in an effort to entice customers - but if Modi is successful in tackling inflation and creating a better business climate in India it will likely spur more investment, not more gold buying.

SaorAlba

All that is contingent on Modi actually reforming the Indian economy to the point at which people lose interest in PM's. He has a big job with lots of obstacles, mostly other politicians.

gsa1fan

The people/masses must have $$ to buy any type of gold. I would think a big jump in demand will be a few years away. When and if they turn India's economy around.

MGLICKER

<< <i>

<< <i>Modi's reforms, if implemented as he promises, would be more likely to reduce gold demand in India as investors put their money in local projects, real estate, etc....most in India buy gold to protect against a weak and fragile economy, not extracting from the profits of a strong and robust one. >>



It's my understanding that India has a cultural and religious affinity for gold that goes back centuries. Protecting from a weak economy in not one of the main reason people crave gold in India. >>



That is true, and they will not touch 14k but only 18K and higher. A strong India economy should pick up demand for the metal.

Turning the economy back in a positive direction of course will take quite a bit of work.

BAJJERFAN

<< <i>

<< <i>Modi's reforms, if implemented as he promises, would be more likely to reduce gold demand in India as investors put their money in local projects, real estate, etc....most in India buy gold to protect against a weak and fragile economy, not extracting from the profits of a strong and robust one. >>



It's my understanding that India has a cultural and religious affinity for gold that goes back centuries. Protecting from a weak economy in not one of the main reason people crave gold in India. >>



Reducing the punitive tariff/s on gold would certainly spur demand, but would it be enough to bump spot by $100 or $200 an ounce?

renman95

2013

It's shocking how messed up their infrastructure is. I think they invented the term "red tape." I really don't know how anything gets done. Nicest people though. When comparing China to India, China is light years ahead. I think the Indians know this. Can they change? Dunno. They need to stop debating themselves and just act.

miklia

<< <i>When comparing China to India, China is light years ahead. I think the Indians know this. >>



Trust me, in many circles, it's all they talk about. Part of the reason why 2013's 5% GDP growth was viewed as a 'disaster' in Delhi. Of course, China could (for the most part) care less about India.

will be interesting to see how Modi tackles the tarrif issue. My guess is he leaves it alone for at least a few months. He's got little to gain from taking it on in either direction at the moment.

CaptHenway

<< <i>

<< <i>

<< <i>Modi's reforms, if implemented as he promises, would be more likely to reduce gold demand in India as investors put their money in local projects, real estate, etc....most in India buy gold to protect against a weak and fragile economy, not extracting from the profits of a strong and robust one. >>



It's my understanding that India has a cultural and religious affinity for gold that goes back centuries. Protecting from a weak economy in not one of the main reason people crave gold in India. >>



Reducing the punitive tariff/s on gold would certainly spur demand, but would it be enough to bump spot by $100 or $200 an ounce? >>



Perhaps $100, but I admit I do not know.

jmski52

I seem to remember reading that the tariff and the economy both had affected gold demand. Being a traditional mode of savings and ceremony in India, I would think that a better economy and a reduction in the tariff would tend be positive for gold demand.

RedTiger

<< <i>

<< <i>When comparing China to India, China is light years ahead. I think the Indians know this. >>



Trust me, in many circles, it's all they talk about. Part of the reason why 2013's 5% GDP growth was viewed as a 'disaster' in Delhi. Of course, China could (for the most part) care less about India.

will be interesting to see how Modi tackles the tarrif issue. My guess is he leaves it alone for at least a few months. He's got little to gain from taking it on in either direction at the moment. >>



I think China cares. I see an often cited fact that China and India were the #1 and #2 economies for 18 out of the last 20 centuries. Both empires see this as the natural order, with the two centuries for England and the U.S. as temporary blips to the natural order of the world. Longer term, India and China see their return to the #1 and #2 spots as their manifest economic destiny, and that they will again be rivals on the world stage.

The gold tariff by itself is a minor issue. The larger issue is whether Modi's policies can successfully revive a sluggish economy. The lower middle class in India will likely always want gold. The super wealthy in India may have other ideas, but even they have a cultural bias towards gold that wealthy Americans never had, likely never will have. Buffett, Gates, the Google guys, Zuckerberg, the Walmart family, none have much affinity for gold. It these were wealthy families located in India, I would guess each and every one would have significant gold holdings. Perhaps small as a percentage, but big in dollar amounts. The India stock market moved up 15% in one week on the election news. That move alone is a lot more buying power and wealth for a nation that has an affinity for gold. If it is the start of something historic, it might mean a double, a triple in their stock market. Part of that wealth will almost certainly find its way to gold. Perhaps not immediately, but it will become a huge tailwind. Keep in mind that an election is only one small event.

It might be helpful to think of the other way, what if a Communist party won the India election by the same margin, on a platform of a wealth tax, an even higher tariff on gold, and a crash in the India stock market? That would be bad news for gold, because that would mean one of the biggest players is a lot less interested in gold.

DrBuster

One of the guys on my team is from/in Gurgaon, he's still stacking bars and said nobody has stopped doing that, tarrifs or not. Tradition is a powerful drug.