Gold Demand in India to Drop as Buyers Hoard Cash

[slowbell]

Now this is an interesting article. According to the article, India has an over 7% inflation rate. Yet, folks are hoarding cash over gold. Furthermore, the price of gold in rupees is going down.

Why isn't demand for gold and price of gold reflected in the high inflation?

I wonder if we could see this in the US. High rates of inflation, yet folks still prefer cash over pms, and having the pms drop in dollars even due to the value falling off a cliff.

http://www.bloomberg.com/news/2012-07-16/gold-demand-in-india-to-drop-as-buyers-prefer-to-hoard-cash-2-.html

Gold demand in India, the world’s biggest bullion importer, is poised to fall for a second year as consumers cut spending and hoard cash amid a slowdown in the economy, the World Gold Council said.

“Demand is going to be subdued, given the state of the economy and the sentiment,” Ajay Mitra, managing director, Middle East and India at the council, said in a phone interview from Mumbai. “People are preferring to stay invested in cash because of uncertain times. They aren’t very optimistic about the economy and the way the future looks.”

[Skirnir_]

This is puzzling indeed. Even with the recent spike in agricultural prices, the GKX is still off its 2011 highs.

[gunDriller]

this is the whole purpose of the "Strong Dollar" policy, of which PM price manipulation is one part.

to convince holders of $ that those $ have more 'value' than used TP.

[slowbell]

This is puzzling indeed. Even with the recent spike in agricultural prices, the GKX is still off its 2011 highs.

You know, I think I understand why. Gold buying in India, is for different reasons. We tend to buy gold to protect against currency devaluations, economic instability, wreckless gov spending, etc. I remember reading how in India, people have a true passion for gold for it's symbol of status. Any upstanding person must own gold. It's cherished and given as gifts at weddings, gold gets handed down through the generations. Folks seem to value themselves more if they own gold. People value each other based upon gold as well, it's sought after for different reasons. It's a cultural thing there, the importance of gold.

So, an in economic slowdown, it would make sense why people are not buying as much. They are focused less on the pleasures in life, and more on survival needs.

[Serpo]

Dont believe this for one minute,Indians value gold over cash by a long shot.

[Sparky]

Statistics don't lie. But people don't understand statistics.

Price is where supply meets demand. So in order to understand demand, you have to view it in the context of price.

The article reports a 29% drop in bullion sales by weight from Q1 2011 to Q1 2012. But isn't demand defined by how much money Indians are willing to spend on gold?

During Q1 2011, India bought 290.6 tons, which is about 9.343 million ounces. The average price per ounce during that period was about 62,500 rupees/ounce. So Indians spent about 584 billion rupees on gold.

During Q1 2012, India bought 207.6 tons, which is about 6.675 million ounces. The average price per ounce during that period was about 84,500 rupees/ounce. So Indians spent about 564 billion rupees on gold.

So instead of the implied drop in demand of 29% percent based on amount sold, the demand measured in dollars only dropped about 3%. Not so much, in the face of a tough economy.

[slowbell]

So instead of the implied drop in demand of 29% percent based on amount sold, the demand measured in dollars only dropped about 3%. Not so much, in the face of a tough economy.

Thanks Sparky. I had to re-read the article after your post. That small 3% decline can be attributed to less earnings as well due to the economy, perhaps. So, Indians are not hoarding cash and are actually spending as much as they did previously on gold, roughly.

Sparky, I believed you destroyed this author's article. Well done!

[Sparky]

...
So, Indians are not hoarding cash and are actually spending as much as they did previously on gold, roughly.
...


Yep, pretty much. More shoddy journalism.

[Uncle Salty]

Dumb article.

More money can be spent on gold as the price rises, but less gold is sold by weight. It is stupid to say gold sales are down because less tonnes were sold even though more money was spent on it. The price of gold has tripled in the last five years in rupee. Well no fucking shit less tonnes are going to be sold. You can check out the gold price in rupee here:


http://goldprice.org/charts/history/gold_5_year_o_inr.png

[Serpo]

In India the gov wants them to cash their gold in.......................

[Twisted Titan]

Thanks Sparky for the excellent clarification

As soon as I read the headline I started to crack up because I KNEW that was bold face lie .

Indians have been around for over 5 thousand years Gold is embeded in their DNA ......... paper will never hold a candle to the importance Gold and Silver NEVER