Here we are again stating gold is moving higher. You have to admit there is major support for this idea with all the moving parts from the economic challenges, both internally and internationally, mining supplies continuing to drop and the geopolitical nightmares that seem to grow instead of contract.
First, let’s look at the down side for higher gold.
If we look at one of the line items against higher gold we see a major factor, the Festival Season in India, where the entire country goes on a buying acquiring spree for about 2 months. This leads into the wedding season where see gold acquisitions sky rocket. Thus far reports all point to Indians slowing their pace of acquisitions due to gold being at higher levels. The population of India is price sensitive to gold and are some of the most savvy gold collectors anywhere. This is why smuggling is a such an issue.
“The increase in gold in the middle of the on-going Dussehra festival and beginning of the marriage season in many parts of India will dash the hopes of any recovery in gold jewellery sales during the festive season,” Mehta said.
Price of 22 carat gold rose to $517, while that 24 carat gold to $542 on Thursday in Delhi, a jump of $8.43 from the previous day’s level.
Sales down
Mehta said gold jewellery sales, which were down by about 25 percent in the initial days of the current festive season compared to last year’s sales, could see further plunge due to the sudden spurt in gold prices. Source
From my perspective this simply means smuggling into India has increased and will continue to increase into years end. Indian people are still acquiring gold but if they can trim a dollar or two of the per gram cost, they will. This will reflect poorly on official gold sales which in turns plays a small role in the fluctuations in gold pricing.
Gold is still flowing into India and people are still acquiring massive amounts of gold. Maybe not as much as last season, but not to the tune of a 25% decline. Remember, as we recently reported, India’s government has trouble counting tons of gold. In the first half of 2019 India’s government, in conjunction with the World Gold Council left a 25% variance in the amount of gold that had been confiscated from smugglers.
Gold Smuggling In India – Who Keeps The Confiscated Gold?
If the gold that has been confiscated, by the Indian government why is there not an exact, precise amount of gold? 10 tonnes of gold is a massive swing – estimates that a total of around 40 to 50 tonnes of gold have been smuggled. I don’t know about you, but I would love to have 10 tonnes of gold or 20,000 pounds / 320,000 ounces of gold from nowhere. The next question is if corrupt-to-the-core government of India is misreporting a 10 ton swing in gold confiscations, how much more is missing or unaccounted?
Now we can take a look at a couple reports that support the idea of higher gold.
The market is still driven by the same quintet of concerns present since the late May price turnaround: the U.S.-China trade war, associated recession concerns, global easy money policies, geopolitical instability and depreciating local currencies. As reported here last week, much of last week’s sell-off had to do with technical selling and profit-taking. The gold market overall seems to be recalibrating – biding its time while keeping a wary eye on the aforementioned concerns. Source
In the past couple of days, for example, two different economic data points are very unfavorable to economic growth.
Automatic Data Processing Inc’s private-sector employment showed that businesses added a modest 135,000 private-sector jobs in September. Economists polled by Econoday had forecast a gain of 152,000. The payroll processor also reduced its estimate of new jobs created in August to 157,000 from an original 195,000.
The lackluster report comes after the Institute for Supply Management’s survey on manufacturing registered at 47.8, down from 49.1 in July, below the 50.2 estimated by economists polled by MarketWatch, representing the worst reading since June 2009. Any reading below 50 indicates contraction. Source
These two points set the table for a lower BLS (Bureau of Labor Statistics) employment number to be released later today Friday Oct. 4. My guess is it will be an unfavorable report as well. If you combine all the above mentioned data points you find major support both short and long term higher gold beginning right now.
These are merely a couple of views surrounding the current environment both for and against higher gold. If one believes the Indian population is going to turn their back on gold because they have to shell out 2-3 extra dollars per gram you are sadly mistaken. If one thinks our broken economic systems are going to miraculously repair themselves, well, once again this is a sad mistake.
The people of India may, in the short term, slightly curb their appetite for gold, but as higher gold becomes the norm, so will the acquisition habits of the Indian people and they will be right back to acquiring just as much gold, if not more, than before the higher prices set in. Just as this norm will return, so too, will the economic problems that have been swept under the rug for more than decade. The difference is after decades of silence and lies about gold being money people are now beginning to be reeducated on the global monetary systems, the Federal Reserve and how gold can protect their wealth. This is a major turning point for gold and probably the single biggest factor supporting higher gold in the near future.
David Roach (David Roche), president and global strategist of independent strategist (Independent Strategy), reportedly believes gold is expected to rise to $1600 an ounce by the end of the year and to $2000 next year.
Spot gold is currently trading at about $1500 an ounce.
“my gut tells me that this is why central bankers denigrate legal tender,” says Mr Roach. “it will only get worse, not better, and people will look for alternative currencies.”
Roach says gold is a good alternative currency because it is safe and there is no cost of owning gold compared to paying negative interest rates for deposits. Source
