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Old 11-15-2011, 04:20 PM   #1
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Gold price hits new record high in India

Looks like gold demand in India is charging full speed ahead:
Quote :
Yesterday the Indian gold price rose 30 rupees to hit a new record high of 29,296 rupees per 10 grams. But rising prices are not scaring investors away - Indians keep transferring their funds to precious metals. The silver price also benefited from this trend, rising 150 rupees to consolidate at 58.000 rupees per kilo.

During the five days of Diwali, the Indian festival of light, gold and silver price registered record sales. But buying interest has not declined. Now that the wedding season has started, Indian gold dealers and jewellers continue to sell large quantities of precious metals. Furthermore, in recent weeks Indian investors have been withdrawing large sums of capital from bond and investment funds, since they expect that in coming weeks stock markets will continue to be under sales pressure. Large amounts of this capital is obviously flowing into the gold and silver markets. ...
...
More: http://www.goldmoney.com/gold-resear...-in-india.html
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Old 11-15-2011, 07:45 PM   #2
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Great post PMBug. Can you explain though how the Indian gold price hit a record high while the USD gold price still remains reasonably below its all time high?

Is the Indian gold market decoupled from the US/London/Asian market? Or does it have to do with the relative price of the rupee with respect to the dollar?
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Old 11-15-2011, 10:20 PM   #3
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Mr Unobtanium,

I'm guessing you're not an FX trader.....haha. Dude, currencies trade against each other and therefore it's possible (and happens every day) for the price of gold (or any other commodity) to go down in US dollars but go up in another currency. All that has to happen is for the currency in question to fall against the US dollar (in percentage terms) more than gold falls against the US dollar..

The best way to get a handle on it is to randomly pick a currency other than the US dollar and watch it from day to day and then you'll understand.

Cheers, ID
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Last edited by Island_Dweller; 11-16-2011 at 12:04 AM.
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Old 11-16-2011, 04:43 AM   #4
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Originally Posted by Island_Dweller View Post:
Mr Unobtanium,

I'm guessing you're not an FX trader.....haha. Dude, currencies trade against each other and therefore it's possible (and happens every day) for the price of gold (or any other commodity) to go down in US dollars but go up in another currency. All that has to happen is for the currency in question to fall against the US dollar (in percentage terms) more than gold falls against the US dollar..

Cheers, ID
Thanks for the info Island. Definitely not an FX trader here. I thought it might have something to do with the relative currency values, so thanks for confirming that.

And BTW, welcome to the forum, it is nice to have you aboard.
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Old 11-16-2011, 10:13 AM   #5
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While I'm no currency trader, I do watch. Due to my psychology and trading tool set, I find that owning just a little (could be way less the 1% of my stuff) makes me watch it a lot closer - something 'bout skin in the game even if it's only a few not quite dead skin cells.

Lately, that something regarding currencies has been EUO, which is short the EURUSD cross.
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Old 11-20-2011, 03:38 PM   #6
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And BTW, welcome to the forum, it is nice to have you aboard.

Thanks! I'm always looking for places to talk PMs. Just ditched my old place (got sick of the fighting and name-calling due to differences of opinion). I want to hang out at a place where people can learn and trade ideas and name calling is kept to a minimum.

Cheers
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Old 11-20-2011, 06:05 PM   #7
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This underscores a strange phenomenon in my mind - one of perception and illusion. Even though we are locked into forced acceptance of a fiat currency (as payment of taxes and debts), the fact that the US dollar is the world's reserve currency (soon to end), and so much foreign currency is "backed" or valued by US dollar holdings, it makes us like the First Class passengers aboard the Titanic. Everyone may wish they were not beholden to the dollar, but many (like China) are forced to grit their teeth and prop it up for their own survival.

Our twisted economic game of musical chairs (where more players are added, rather than chairs removed, in an every expanding circle of claimants on a limited number of chairs) is unusual here: What can cause the music to stop altogether, with a mad implosion to the middle by everyone? A contraction of the dollar, as the credit stops expanding. Greece and Iceland can implode and it poses a financial strain on the European economy, but if the dollar implodes - and that is unavoidable in the long term - everything else implodes along with it, as all are sucked into the same, massive black hole.

Add to that the fact that other fiat Ponzi schemes are far more leveraged than us means a likelihood of greater time to funnel our currency holdings into what really is a finite number of value-retaining life rafts - and all because a faster drop on the part of a fellow skydiver can look like a "rise" on the parts of those who don't fall quite as fast.

Last edited by Steven Douglas; 11-20-2011 at 06:13 PM.
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Old 11-20-2011, 07:09 PM   #8
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Originally Posted by Island_Dweller View Post:
And BTW, welcome to the forum, it is nice to have you aboard.

Thanks! I'm always looking for places to talk PMs. Just ditched my old place (got sick of the fighting and name-calling due to differences of opinion). I want to hang out at a place where people can learn and trade ideas and name calling is kept to a minimum.

Cheers
Welcome and glad you found your way here.
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Old 12-06-2011, 06:47 AM   #9
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Quote :
A sharp drop in the value of the rupee against the US dollar in early November helped to moderate Indian demand for gold and silver during the tailend of the Diwali festival of light, according to new market analysis.

... In addition to this recent rise in precious metal prices, operators and investors are less enthusiastic about buying as the outlook on global economic growth keeps getting worse. Due to the devaluation of the rupee recently many investors have withdrawn their capital from Indian stock markets, causing stock prices to fall. The European banking and sovereign debt crisis also gave foreign investors further reasons to repatriate their capital. As a consecuence, India's stock markets have been under pressure.
...
In this eventuality, it would be tough for the emerging markets not to suffer from a collapse in demand from the developed world. The fallout from the bursting of the Chinese real estate bubble could also cause serious problems for the global economy. A slight decrease of Asian demand could cause metal prices to drop further, thus offering investors excellent buying opportunities at an attractive price level. ...
More: http://www.goldmoney.com/gold-resear...ales-fall.html
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Old 12-06-2011, 07:30 AM   #10
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If Europe implodes on us, and the Eurozone reverts to treaditional national currencies, the dollar will blast up over 90 - 95, and PM's will get sent to the woodshed. However, we will have a unique opportunity to buy them on the cheap for as long as the dollar can keep it's pants on. I would say we could see a three month super rally in the dollar, but when the realization sinks in about our debt, and just how unsustainable it is, it will quickly crash out, permitting PM's to explode.

Just my humble opinion.
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Old 12-06-2011, 07:44 AM   #11
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I think supply stress will make taking advantage of the dollar's strength vs. paper gold difficult. By the time it becomes that great a bargain, you will be hard pressed to find anyone selling large quantites of physical gold and silver.
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Old 12-06-2011, 08:09 AM   #12
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Looks like PMs are going to the woodshed right now. I don't think the dollar going up in that measure is the reason - they are going down relative to oil too. My system would have you sell your non core holdings at this point, at a loss - it happens. I'm not sure I will this time. Looks like someone had to raise more cash than people wanted gold right then or something like that. That's usually "transitory"
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Old 12-06-2011, 09:18 AM   #13
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Originally Posted by DCFusor View Post:
Looks like PMs are going to the woodshed right now. I don't think the dollar going up in that measure is the reason - they are going down relative to oil too. My system would have you sell your non core holdings at this point, at a loss - it happens. I'm not sure I will this time. Looks like someone had to raise more cash than people wanted gold right then or something like that. That's usually "transitory"
To me.. it looks like we just had to fill the gap up for the GDX + GDXJ from last week while gold tests the lower rising lows line. Personally, I don't like seeing us test the lower end of that triangle. Definitely makes me worried about future selling.

What we really need today is a cleanup in gold and the shares. Prolonged selling into the end of the week wouldn't be good.
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Old 12-06-2011, 10:28 PM   #14
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There is some unintentional comedy in this article (bolded parts - emphasis mine):
Quote :
That Indian households hold the yellow metal close to their heart is a known fact. A new report indicates that the gold close to every Indian's heart and in most homes could be well over $950 billion, which in turn is around 50% of the country's GDP in dollar terms.

Gold consumption is part of India's culture and tradition. At $950 billion, the hoarding represents 11% of the global stock, the report has said, making India one of the largest private gold holders in the world.

Indian households hold 18,000 tonnes of gold, says global research firm Macquarie. In a report, the firm has noted that bars, coins and other modes of retail investment during 2011 have also reported a 90% increase, which are all testimony to the untamed demand for the yellow metal in India.
...
WORRIED ECONOMISTS

However, the Indian mentality to hold on to their precious tonnage has got many economists worried. ...

India's yellow metal fetish is threatening to take the shine off its fast paced economic growth, with many economists saying that financial markets are losing out on funds that have instead been spent on gold.

"The 18,000 tonnes of metal in Indian households is almost double the gold reserves maintained by the US Federal Reserve. And it just sits idle in family vaults across India as ornaments, bars and coins,'' said an analyst with a brokerage firm.

Y Venugopal Reddy, a former governor of the India's central bank, the Reserve Bank of India, has said that it has created an incurable `drain on savings', threatening to hobble economic progress. As gold fever grips most households in India, the country's household savings rate has plummeted in the financial year that ended on March 31 to 9.7% of GDP, compared with 12.1% in the previous fiscal year.

Moreover, with the central bank raising interest rates more than 12 times since March last year to combat double digit inflation, domestic deposits and fixed income investments have been looking increasingly vulnerable.
The Bombay Stock Exchange benchmark Sensex has also fallen more than 16% till September and since the start of 2011.
...
More: http://www.mineweb.com/mineweb/view/...ail&pid=102055

Keynesian economists and central bankers really derped it up there.
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Old 12-07-2011, 10:29 AM   #15
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The bank runs are already underway in Europe. Greece is an open run, but Spain, Portugal and Italy are under the radar runs for now. If Frau Merkel and Sarko can't shake that knot loose and do it soon, we will be witness to all hell breaking loose.
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Old 12-12-2011, 05:33 AM   #16
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Bottom line: Indian inflation of the rupee is fueling high gold prices and high accumulations of gold in India. Or maybe it would be better to say that flight to gold in India indicates that the government is debasing the Indian Rupee.
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