Stephanie

Still No Inventory Reduction at GLD

There is also the seasonality of the gold markets. The Indian holidays started with Rakhi, or Raksha Bandhan on Saturday. JUST prior to that, after gold hit way down (under 12.000 rupees per 10 grams), demand for gold went way up, causing the shops to run out and say that they would have to wait 'til August 20th to get more in from overseas sources.

This is what I'm saying. Gold has its ups and downs during the year. India is the world's largest market for gold because of its population size AND its gold culture that is part and parcel of an Indian's personal life, whether it's holidays, religion, savings, or gifting in general. Don't forget weddings! The father will have been saving for his daughter's dowry, or stridhan, which can be added to by the mother, brother, or in-laws (at the time of the wedding), from the time she was born. Same thing happens when a boy is born, only for his future wife. The holidays there start right about the time the farmers harvest their crops (mid-August thereabouts), and because these are agriculture profits, they are not taxed. Farmers, living as they have for thousands of years with experience with corruption and failed currencies, will get rid of their rupees for gold. Most of these people are "unbanked" and don't have access to different ways of saving. Even if they did, they couldn't trust the banks to not lose their savings for them.

Their connection with gold goes so far as to have women with gold comment that when they lose a mate of a pair of earrings, they stash away the remaining mate as part of their holdings.

Because Indian women have been relatively uneducated and more or less run things in India on the social level and not on the economic level, they are given gold, and only they can decide what happens with the gold (that is protected by law). They have the gold in the event they lose their husband or family and have to survive on their own.

With that, Indians are very price-sensitive, and when they see price drops like this, especially around holidays, they inhale it big time! And you can also see that if their gold were to be confiscated, you would be dealing with a billion angry Indians!