(By Indranil Sen Gupta) INDIAN CULTURE CHANGES TO INTERNATIONAL
Gold in an integral part of Indian culture. The importance of gold can be understood in the saying all glitters are not gold. It also can be noted from the way events or achievements are named like golden anniversaries, golden jubilee, gold medals, gold credit card etc. In India people buy gold anytime and not only during special occasions like weddings, festivals or special events. Gold is also offered to Indian deities. The Indian Hindu calendar even has auspicious days to buy gold like Dhanteras and Dassera. Gold is also bought on festivals like Onam, Pongal and Durga Puja. But now it seems that the global calendar is also going to make similar occasion for buying gold. Gold has changed with the changing times. The objective of this article is to find out the factors which will boost up the gold price to around Rs32000-35000/gram in Indian markets and internationally above $2100-2200/ounce .I find the next contributor to the price jump might be from RBI.
INTERNATIONAL PRICE BACK UP
The year 2011 was an impressive year for gold investments and in terms of performance. In volume terms it rose by 0.4% to 4067 tonnes with an value tagged at US $207.5 bn. Investment was the main contributor to gold values other than jewellery and technology drivers. The demand of gold bars and coins has accelerated globally followed with poor performance of other assets classes of investments.
Low and negative interest rates in US and European economy is going to boost up the returns and demand of gold prices till 2014.Further gold's preference to hedge against Inflation will result to an higher demand of gold coming from India China and Vietnam. Global position of gold is also very strong. China needs no introduction regarding its gigantic gold demand. Moreover china is running with high inflation which spooks the demand of gold further in order to hedge against inflation. In fact I find no economy on the earth which has made propaganda to its citizens to invest in gold through all media forms. The reserve of the central banks has swelled by 500 tonnes over the last two years mostly by developing economies like BRIC. Further diversification of foreign reserves; add to the momentum of gold demand by BRIC nations. In other words these nations are trying to capitalize gold as preserving its foreign reserves and promoting financial stability. The ongoing volatile currency market international in domestically increase the demand of gold investments and storage. The below image is the demand chart of gold in tonnes.
One of the most enduring strength of gold price is its low correlation with risky assets class. In fact gold is shifting away from its "commodity" phase and into its "safe haven" persona. Gold price is not an bubble.US underperformance and European economic doldrums will give boost to the gold price and demand where as the real threat comes from china since its economic slowdown could cause minor affect of over gold outlook.