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Gold outlook is gloomy as the US economy shines (Part 19 of 21) (Continued from Part 18) India’s rising real interest rate
Tracking China’s and India’s inflation figures can give you insight into the future direction of gold prices. The figures also suggest what could happen with gold-backed ETFs such as the SPDR Gold Trust (GLD).
With this insight, you can decide what to do with gold stocks such as Goldcorp (GG), Barrick Gold (ABX), Newmont Mining (NEM), Kinross Gold (KGC), and Yamana Gold (AUY). You can also decide how to invest in ETFs such as the Market Vectors Gold Miners ETF (GDX). GG, ABX, NEM, KGC, and AUY make up 10.2%, 8.5%, 7.4%, 3.1%, and 3.5% of GDX holdings, respectively.
Tracking real interest rates
We’ll use the ten-year government bond yield as the nominal interest rate in India. We’ll use the year-over-year change in the consumer price index (or CPI) as India’s inflation.
CPI data are released monthly by India’s Central Statistical Organization. These data measure the average changes in the general price for a basket of consumer goods and services over time.
Low inflation
According to the latest data, India’s inflation in January was 5.1% year-over-year compared to 5.0% year-over-year in December. Growth in the CPI has averaged 8% since 2005. Consumer price inflation has been higher than benchmark interest rates and government bond yields for a long time. This caused negative real interest rates, which discouraged savers. But now, things are changing. Inflation fell rapidly in 2014 and is continuing on a steady path in 2015.
Rising real interest rate
In India, the yield on a ten-year government bond is currently 7.7%. Adjusted for 5.1% inflation, the real return comes in at 2.6%. India’s real interest rate has moved up rapidly in the last few months due to declining inflation.
Gold still popular among the rural population
Increasing real interest rates could motivate some urban gold investors to move to other investments. But the majority of India’s population is rural. They don’t have easy access to banks and other investment options. Gold is an easy and available investment option for them. To an extent, it maintains their purchasing power. This makes gold one of the most popular investments.
Continue to Part 20 Browse this series on Market Realist:
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Kinross Gold Corporation
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PRODUCTEUR |
CODE : K.TO |
ISIN : CA4969024047 |
CUSIP : 496902404 |
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ProfilIndicateurs de MarchéVALEUR : Projets & res.Communiqués de PresseRapport annuelRISQUE : Profile actifsContactez la cie |
Kinross Gold est une société de production minière d'or basée au Canada. Kinross Gold est productrice d'or, d'argent en USA, au Bresil, au Canada, au Chili, au Ghana, en Mauritanie et in Russia, en développement de projets d'argent, de cuivre et d'or au Chili, et détient divers projets d'exploration au Canada, au Chili et in Russia. Ses principaux projets en production sont ROUND MOUNTAIN en USA, CRIXÁS, MORRO DO OURO et PARACATU au Bresil, REFUGIO MINE (VERDE AND PANCHO), FORT KNOX, MARICUNGA et LA COIPA au Chili, PORCUPINE et MUSSELWHITE au Canada, CHIRANO au Ghana, TASIAST en Mauritanie et KUPOL in Russia, ses principaux projets en développement sont KETTLE RIVER, GOLD HILL et CERRO CASALE au Chili et ses principaux projets en exploration sont AHAFO NORTH, BIBIANI NORTH, BOLE, BOLE - BOLGATANGA, AKYEM, RUSSIAN MOUNTAIN, HORN MOUNTAIN, GIL, ENCHI et GOLDBANKS - KINROSS au Ghana, FRUTA DEL NORTE en Equateur, HAMMOND REEF au Canada, KUBAKA MINE - BIRKACHAN in Russia et LOBO-MARTE au Chili. Kinross Gold est cotée au Canada, aux Etats-Unis D'Amerique et en Allemagne. Sa capitalisation boursière aujourd'hui est 11,0 milliards CA$ (8,8 milliards US$, 7,7 milliards €). La valeur de son action a atteint son plus bas niveau récent le 27 octobre 2000 à 1,43 CA$, et son plus haut niveau récent le 13 décembre 2002 à 9,99 CA$. Kinross Gold possède 1 246 749 952 actions en circulation. |