Seeking Alpha

Indian demand for gold evaporates

  • In retrospect, it's looking like gold's big summer rally was the flip side of the tumbling Indian rupee (as well as some other EM countries). Trouble is, the rupee has weakened so much vs. gold that it's choked off Indian demand - gold imports slumped 95% in August to just 2.5 tons vs. 47.5 tons in July, according to Mineweb.
  • That may just be a start as the Indian government is looking to impose another round of duties on imports of the yellow metal. "The country (is) no longer prepared to be a dumping ground for the world’s surplus gold at the cost of their more positive yielding assets," writes Izabella Kaminska in the FT.
  • With India shut down and ETF interest continuing to slip, will traditional importers like China and the MIddle East step up?
  • Gold continues to slide today, -2.8% to $1,326 per ounce.
  • GLD -2.8%.
  • ETFs: GLD, IAU, SGOL, PHYS, AGOL, DGL, UBG, DGP, UGL, DZZ, GLL, DGZ, UGLD, DGLD, GLDI.
Comments (39)
  • Iamcurious
    , contributor
    Comments (11) | Send Message
     
    I'm not too surprised or even concerned. I can't undo the stash of gold and silver I've accumulated but I do know that, in the long term, my money is safe. With the government, the Fed and many of the financial experts acting in concert these days to destroy the value of the dollar, I no longer hope to at least maintain some parity with inflation by making a little money. Number 1 priority is to minimize the damage to my saved money. I've accomplished that and ignore day to day fluctuation.
    12 Sep 2013, 03:17 PM Reply Like
  • yv204
    , contributor
    Comments (159) | Send Message
     
    Over the long term, adjusted for the cost of carry, inflation, and government paper yields, return on gold is negative.
    12 Sep 2013, 04:22 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4089) | Send Message
     
    With the bear market in Gold re-establishing itself here , it may be just more than day to day fluctuation..

     

    http://seekingalpha.co...

     

    Any rally back to the 1350- 1360 level,, IF it occurs , will be an opportunity to "get out of dodge"
    12 Sep 2013, 03:31 PM Reply Like
  • angelg44
    , contributor
    Comments (15) | Send Message
     
    Good comment. Just ignore these day-by-day fluctuations caused by massive market manipulations. The day when everybody will see that .. the King has no clothes ...i.e. the Dollar has no value, is fast approaching. Your silver dollar may fill the tank of your vehicle when nothing else works. Just check number of hyperinflation spirals has happened in Europe last 100 years - and there is the answer.
    12 Sep 2013, 03:32 PM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    Dollar has no value? It is difficult to formulate a polite response to such a comment.
    12 Sep 2013, 03:58 PM Reply Like
  • jackscure
    , contributor
    Comments (42) | Send Message
     
    You're right- the USD does have some value -- it's worth 4 cents compared to what it was worth when the FRAUDulent Reserve came on to send SCAMerica down the tubes- which couldn't come soon enough. MOST incompetent, corrupt Government/System in history. Pathetic Nation Under God (which ObaMORON thinks he is) With Corruption and Food Stamp Cards For ALL!
    12 Sep 2013, 04:20 PM Reply Like
  • losbronces
    , contributor
    Comments (596) | Send Message
     
    India not going after gold in temples: http://bit.ly/18TWtpw. They did leave open taking that gold as a "last resort."

     

    So what happened to all the gold smuggling in India?
    12 Sep 2013, 03:36 PM Reply Like
  • Doug Eberhardt
    , contributor
    Comments (2666) | Send Message
     
    I think the selling in gold will continue to year end, an article I am getting ready to write soon. I stuck with my cautionary call from Aug. 12 (was a little early) and reiterated it Aug. 27th with "Sticking With Stronger Dollar and Weaker Gold Through End of Year" http://bit.ly/15AYcRs

     

    Why would gold sell off until year end? Stay tuned. There will of course be bounces along the way. One will come heading into the debate on the debt ceiling as the X date of Oct. 18th approaches.
    12 Sep 2013, 03:36 PM Reply Like
  • eagle1003
    , contributor
    Comments (1460) | Send Message
     
    Nice call Doug.
    12 Sep 2013, 09:47 PM Reply Like
  • Doug Eberhardt
    , contributor
    Comments (2666) | Send Message
     
    Thanks Eagle...
    12 Sep 2013, 10:11 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (7838) | Send Message
     
    How come on big up days for gold the "analysts" claim it is just an anomaly but on big down days the "analysts" say its indicative of "deteriorating fundamentals"?
    12 Sep 2013, 03:59 PM Reply Like
  • dieuwer
    , contributor
    Comments (2226) | Send Message
     
    FT has long lost any credibility.
    12 Sep 2013, 04:07 PM Reply Like
  • dieuwer
    , contributor
    Comments (2226) | Send Message
     
    Who cares how much gold "officially" was imported. Indian black market gobbled up dozens tonnes.
    Besides, with the rupee on the verge of hyperinflation do you really want to own bonds or stocks in India?
    12 Sep 2013, 04:06 PM Reply Like
  • Kuro1
    , contributor
    Comments (40) | Send Message
     
    The demand and purchases are still there, the high duty imposed by the government has sent the imports to the black market... Just like drugs and other high duty / illegal commodities gold will make its way to the buyers... Rather than bring it into India, the transactions will be offshore
    12 Sep 2013, 04:07 PM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    Short GLD. Hedged with long calls. I might that calls are mighty expensive these days. Implied volatility is off the chart.
    12 Sep 2013, 04:18 PM Reply Like
  • dieuwer
    , contributor
    Comments (2226) | Send Message
     
    If IV is high, should you not be selling ITM covered calls, or OTM puts?
    12 Sep 2013, 04:19 PM Reply Like
  • GOOBIE
    , contributor
    Comments (304) | Send Message
     
    The dollar is not intended to be worth anything . Currency is just a transactional medium making it easy for the government to fund itself . Try paying your taxes with a truckload of soybeans .
    12 Sep 2013, 04:52 PM Reply Like
  • minecanary
    , contributor
    Comments (400) | Send Message
     
    You can judge the quality of the piece by the author suggesting it's surplus gold being dumped on the poor Indians....as the gov't imposes control after control to slow down the imports. This w/gold in backwardation, the COMEX about to melt down, and the German's waiting 7 years to get their gold back. As soon as Obama tries to man up against Putin and shoots some missiles, the Chinese will gladly double their purchases while dumping T-bills
    12 Sep 2013, 05:10 PM Reply Like
  • losbronces
    , contributor
    Comments (596) | Send Message
     
    Yes, that part was pretty crazy. After reading about all of the smuggling going on, I don't think anyone is "dumping" gold on India anymore than they are "dumping" cocaine on the USA.
    12 Sep 2013, 05:19 PM Reply Like
  • kickshark
    , contributor
    Comments (28) | Send Message
     
    Indian demand decreased is temporary. If central bank is unable to control inflation or spur economy growth, the amount of Gold import is set to increase drastically.
    12 Sep 2013, 05:16 PM Reply Like
  • dieuwer
    , contributor
    Comments (2226) | Send Message
     
    The India central bank is very able to control inflation: they just have to stop printing rupee like mad.
    12 Sep 2013, 06:00 PM Reply Like
  • archeyne
    , contributor
    Comments (40) | Send Message
     
    I got a feeling we are in for a pop in the price of gold over the next week or so... This is a bit of a correction in the price, i can see it getting back up to 1400 by end of month and 15-1600 within 6 mths.

     

    I wouldn't sell right now, in fact look to some of the miners as they have been hammered over the last few weeks. Once the bounce happens you are going to get a big bump in these miners...

     

    Also, I dont think demand for gold is going anywhere but up. These emerging markets love gold... In fact everyone loves gold.... Have you never watched Austin Powers "Goldmember"
    12 Sep 2013, 05:20 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4089) | Send Message
     
    Wishful thinking,, 1350- 1360 are will cap any rally attempt.. IMO You are looking at 30% downside from here,
    12 Sep 2013, 06:09 PM Reply Like
  • archeyne
    , contributor
    Comments (40) | Send Message
     
    Well only time will tell... But I have a feeling that you are incorrect... 30% down leaves gold in the lower end of the 900's... I mean really can you honestly tell me that you think its going there...

     

    Anyways, here is to hoping you are wrong. I feel like gold has dropped very quickly on fears... How can the idea that we are not going to bomb a country and that a small amount of tapering drop the price that fast... We have a lot of people who are betting against gold, and it makes the price swings very bumpy...

     

    If you are short gold, then only one of us will be smiling in a couple months... Hope it is me!
    12 Sep 2013, 07:05 PM Reply Like
  • fafatooey
    , contributor
    Comments (345) | Send Message
     
    Pffft. Says that guy that told all that coal companies had bottomed in 2011. Nice call, LOL.
    12 Sep 2013, 10:01 PM Reply Like
  • Tao Jaxx
    , contributor
    Comments (1269) | Send Message
     
    Asian gold demand (mostly physical) is twofold:1) Legit investment due to the lack of alternatives offered by repressed financial systems and 2) corruption money.
    See smart Ragu Rajan (new Central Bank Governor)'s measures in India: Access to financial services for the poor and issuance of CPI linked securities to hedge from inflation mean that gold demand will be confined to ritual jewelry and corruption proceeds over the coming years.
    Once the Chinese follow suit on Rajan's ideas, Asian demand will trickle to a shadow of itself.
    12 Sep 2013, 05:27 PM Reply Like
  • J Collins
    , contributor
    Comments (178) | Send Message
     
    Indian economy is in trouble. Politicians are trying to curb official import of gold but privately they are encouraging black market of the same metal and personally profiting from this dual stance by giving patronage to the gold smuggling mafia of coastal areas.
    12 Sep 2013, 05:34 PM Reply Like
  • Tao Jaxx
    , contributor
    Comments (1269) | Send Message
     
    Correct. But:
    1) They are about to be thrown out by the next elections.
    2) They thought Rajan would be content to have a wonderful residence and sit pretty, but that was their mistake: he has little to lose and everything to gain in making a difference. My bet is he's going to kick asses out there, starting with some high ranking ones.
    12 Sep 2013, 05:46 PM Reply Like
  • dieuwer
    , contributor
    Comments (2226) | Send Message
     
    Of course, blaming gold for India's woes won't help as the problem is the mindboggling amount of rupee money printing going on.
    Let's suppose India bans gold and the Indians stop buying gold. You really think the rupee suddenly becomes a strong currency?
    Think not. There is still the HUGE oil import bill to pay...

     

    What will most likely happen instead is that Indians find other ways to preserve purchasing power; like bidding up property into the stratosphere (see China), or buying land, cattle, or whatever else is available.
    Are when then going to ban the sale of houses or cows?
    12 Sep 2013, 06:04 PM Reply Like
  • arabianmoney
    , contributor
    Comments (3) | Send Message
     
    Of course gold is at a record price in Indian rupees... those who bought last year have been completely protected against devaluation.
    13 Sep 2013, 07:39 AM Reply Like
  • J Collins
    , contributor
    Comments (178) | Send Message
     
    Any further curbs in gold imports by Indian politicians will only exacerbate public distrust in the economy and make the bad situation worse. The less the Indians trust their governments, the more they gravitate to gold. This has been the case since they gained independence in 1947 and has only grown over the years. Weakness in Indian currency further convinces the Indians that hard assets are pretty much the only real stores of value available to them. They traditionally don't invest in government bonds because to some extent, they do not trust their governments as custodians of their trust and more importantly because bulk of wealth in the country exists as black money (tax evaded) so the only realistic options left for it to flow to are hard assets like precious metals and real estate. And of course it is no coincidence that real estate in India is currently in a giant bubble.
    12 Sep 2013, 06:48 PM Reply Like
  • Macrotrader100
    , contributor
    Comments (2601) | Send Message
     
    I covered most of my gold shorts today on this washout. Perhaps we get a bounce. That was a fast 80 point drop.
    12 Sep 2013, 06:58 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (4089) | Send Message
     
    Macro,

     

    You made a great call,,

     

    maybe a bounce from here but i believe we see 1200 before 1400 ..

     

    I will add to short on any bounce , and recommend for those that are long to seek the exits . May be the last time to "get out", as we may very well see a triple digit print on gold in 2014...From there a very long period of non performance . The secular bear in Gold has just begun
    12 Sep 2013, 08:34 PM Reply Like
  • eagle1003
    , contributor
    Comments (1460) | Send Message
     
    Macrotrader: Nice play. You obviously did not buy into "the demand for physical is through the roof" garbage that we have been hearing for various tunnel visioned goldbugs and so called analysts who should have known better.
    12 Sep 2013, 08:32 PM Reply Like
  • Macrotrader100
    , contributor
    Comments (2601) | Send Message
     
    The risk to staying short a large dip, is does Syria news change. I think there will be a bounce.
    12 Sep 2013, 09:30 PM Reply Like
  • CoinsK
    , contributor
    Comments (2457) | Send Message
     
    Eagle,
    Since Americans don't save money as a rule anyway,Gold does NOT have to go "through the roof" in order for Gold money owners to do well in the future. They will have there wealth preserved unlike people with only paper.
    12 Sep 2013, 10:52 PM Reply Like
  • CoinsK
    , contributor
    Comments (2457) | Send Message
     
    THEIR wealth Not "there"

     

    http://bit.ly/14QhtLm
    12 Sep 2013, 11:05 PM Reply Like
  • RM13
    , contributor
    Comments (688) | Send Message
     
    The problem with this report is the huge black market that has been created in gold in India now. As long as gold tariffs are in place, similar reports will follow - and gold will flow into India regardless.
    13 Sep 2013, 12:10 AM Reply Like
  • june1234
    , contributor
    Comments (2345) | Send Message
     
    You can blame India, unemployment claims, tapering or the NY jets but demand for the physical stuff remains very strong across globe
    13 Sep 2013, 04:33 AM Reply Like
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