2012-02-14

Must see report on Indian weddings



H/T: FOFOA.

FOFOA also has more information on India's love for gold in India's Gold
Gold demand is generally inelastic in currency terms because its primary use is as a wealth reserve. This is in contrast to industrial metals where demand is relatively inelastic in weight terms. In other words, gold flow by volume should be observed to decline as the price rises while gold flow by value might remain steady. Yet India's gold intake has risen from $4.1B in 2002 to $33.8B in 2011. That's an 824% rise in demand in currency terms at the same time as the price of gold in dollars rose only around 600%. And this while running a trade deficit
Indians buy gold no matter what, in fact it is on par with crude oil. India gold import bill may touch $100 bn
According to RBI, the current account deficit is a cause of concern because of inelastic gold and oil demand, it said.
Think about the implications of inelastic Indian gold imports. Thus far, nothing stops Indians from buying gold (FOFOA has a chart of gold priced in Indian rupees—a 30-year bull market). Now mix in India's GDP growth rate of 7% or more. Then consider all the money printing by central banks around the globe and the debt crisis in Europe. Finally, consider the reflexive psychological effects of rising gold on faith in paper currency.

One more thing to consider. Gold priced in rupees has seen a 30-year bull market, another way of saying the rupee has been in a 30-year bear market. What happens to gold imports if the rupee strengthens? When gold enters the bubble stage, there will be some interesting economic data coming out of India.

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