India’s Monsoons Blowing in Higher Gold Prices

As one of the largest markets for gold, India’s cultural and social changes are important influences on the precious metal’s price. The nation of almost 1.3 billion people has a strong relationship with gold, which is interwoven in marriage ceremonies and cultural rites. Just last month, high prices were driving many citizens to trade in their gold jewelry while gold bazaars and markets were seeing a sharp uptick in activity. Now, according to a Business Insider article, a healthy monsoon season, abundant crops, and lower prices are sending many farmers back to the gold market to buy.

India’s farmers are heavily dependent on a good monsoon season for growing their crops, and so far, 2016 has been the best season in three years. Farmers also make up a third of the country’s gold consumers, and markets are expecting higher demand given the increase in disposable incomes. Sales for gold jewelry are expected to jump as much as 60% over last year, according to the India Bullion and Jewellers Association.

Also thrown into the mix are the annual festivals like Diwali, one of the country’s biggest shopping seasons, and a time where celebrants buy gold jewelry for themselves and others. After Diwali is the traditional marriage season, and 40% of a typical Indian wedding’s expenses can be attributed to gold jewelry.

The total cost for all weddings is estimated to hit 1.6 trillion rupees, or $24 billion, by 2020, according to an India-based research firm. “If we use the higher estimate,” Business Insider states, “that means close to $10 billion could be spent on gold alone.”

India’s recent monsoons are only one reason many analysists and financial experts are bullish for gold in Q4 and 2017. UBS is looking for any incremental rate increases by the Fed to continue to push gold prices upward. In addition, if the Fed has a December rate increase, it could trigger a strong bull market similar to last year’s market.

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