Gold Buying Season in India

November 11, 2008 | By | Reply More

This is the traditional season for Indians to buy gold and this year it is hitting new heights. Indian farmers have been well pleased with their crops and have been spending their hard earned money on topping up their store of gold reserves in anticipation of rainy days ahead.

Indian dealers are reporting bumper sales and record premiums over the paper price.

These unusually high premiums have been the norm throughout the world in recent weeks which begs the question why gold continues to languish range bound between  $700 -$800 in broad terms.

In the face of an ever worsening global meltdown with stock markets showing no signs of bottoming out and the threat of imminent hyperinflation drawing ever nearer as the printing presses continue to roll out reams of fiat currencies it is hard not to draw the conclusion that the Indian farmers have got it right.

How long the US can hold back the floodgates is anybodies guess, but it is simple to see that the most sensitive factor in this complex equation is maintaining the value of the dollar and thus the confidence of those countries to which the US is most in debt, particularly China.

By the same reasoning these countries will have an awful lot to lose if they don’t back up the US in its efforts.

Therefore allowing the price of gold to rise too high too fast will reflect negatively upon the dollar and hasten its’ demise.

This is why we believe that it is the activities of central banks that is keeping gold from reflecting its true value in this time of deepening crisis.

Again we think that the heavy hitting ‘big dogs’ have recognised this and is the reason why they have been lowering their long positions thus adding to the downward pressures on the gold price.

Here at Precious Metal Investments we do not think that the powers that be can keep the lid on this situation for much longer.

We think that the trigger will be pulled when the oil price begins to move up above $70-$80 a barrel, the break even for several producers.

Already OPEC members and others, particularly Russia, are clamouring for production cuts that we fully expect to be agreed and further cuts will continue until demand pushes the price to the producers acceptable level.

When this occurs we expect gold to follow and take its impetus well above the $1000 level.

Getting the timing right will be crucial and you can be sure the big dogs will be first to get back in. If you go along with our opinions keep an eye on, or even subscribe to the ‘Commitment of Traders’ site where you can find out where traders are positioning themselves in gold, other commodities and currencies.  

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