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Albert Sung is the author of the Katchum Macro-Economic Blog, monitoring breaking economic news from a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at... More
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  • Indian Gold Premium Drops 50% 2 comments
    May 31, 2014 5:58 AM | about stocks: GLD

    As I wrote here exactly a week ago, I saw that Indian gold premiums would fall. And they did.

    Premiums have indeed dropped from $90/ounce to $30/ounce, that's more than a 50% drop.

    So with premiums of gold going back to this low level, gold jewelry will be cheaper for the people to buy and I expect pent-up demand to come back.

    As you can see on this chart, the premiums have come back to the 2012-2013 level of $30/ounce.

    Local gold price premiums

    This also means that the India gold import trade will go back to the 2012 levels. I expect that the official numbers will double. This will add at least another 30 tonnes/month of demand from India, which balances the recent decline in demand from China.

    (click to enlarge)

    India Gold Trade (In Gold We Trust: Koos Jansen)

    Stocks: GLD
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Comments (2)
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  • samuraitrader
    , contributor
    Comments (883) | Send Message
    how does this translate in local currency? thanks for the posts.
    31 May 2014, 07:59 AM Reply Like
  • Katchum
    , contributor
    Comments (615) | Send Message
    Author’s reply » In Indian rupees, the gold price will drop drastically as the Indian rupee is now strengthening. As Indian people will start to buy more gold and the Indian premiums go down, the U.S. dollar gold price will go up as there is a clear negative correlation between Indian premiums and U.S. gold price. The lower the premiums, the higher the U.S. gold price.


    Indian people will be smuggling less gold and will be able to buy gold officially and more efficiently. I also expect the silver trade to slow down then, but that doesn't mean silver will drop in price as silver is ultimately correlated to the gold price, which should be going up. Especially as the large commercials are now reducing their short positions in both gold and silver.
    31 May 2014, 10:23 AM Reply Like
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