Gold has become a lifeline for Indians in the midst of a severe credit crunch.
When the state-run lender refused to extend Babasaheb Mandlik credit, he used his wife’s gold jewelry as collateral for a loan in order to buy cotton seeds before the summer sowing season window closed.
After a dip in demand in 2018, it appears Indians are buying gold again.
Anecdotal data seemed to indicate strong demand for the yellow metal in India during the Akshaya Tritiya holiday. Retailers reported sales were up by as much as 25%. As it turns out, demand was indeed strong. Gold imports into India were up 36% year-over-year in May, according to sources cited by Bloomberg.
Jewelers and dealers in India reported brisk gold sales on Akshaya Tritiya, despite the holiday falling on a workday and extreme heat in some regions of the country.
Akshay Tritiya ranks as one of the four most important days for Hindus. The word Akshay roughly translates to “the never diminishing.” The day is believed to bring good luck and success. It is also considered one of the most auspicious occasions to buy precious metals, including gold.
The Reserve Bank of India has jumped on the gold bandwagon.
Since December 2017, the Indian central bank has added 50.4 tons of gold to its reserves.
India bought 8.2 tons of gold in January and February of this year and analysts project that pace to pick up. Economist Howie Lee told Bloomberg he expects the RSB to add as much as 1.5 million ounces of gold to its reserves in 2019. That comes to about 46.7 tons.
Everybody wants gold. Some people want it so bad that they’re willing to break the law to get it. That’s why we have police. They stop the bad guys.
At least that’s how it’s supposed to work. But don’t miss what I said. Everybody wants gold. Police officers fall into the category of “everybody.” So, it should come as no surprise that every once in a while, you run into a cop willing to break the law to get his hands on some sparkling yellow metal.
This, in fact, happened recently in India.
Last week, there was some significant news out of India that could further boost the country’s gold market.
The Indian government will now allow banks to engage in gold bullion business – including holding, buying, selling, hedging and leveraging the yellow metal. Under current rules, banks can only serve as a consignment or channeling agent in the import of gold bullion for jeweler and exporters.
The loosening of regulations could increase a gold market that already ranks as the second-largest in the world behind only China.
Last Friday, I told you where you can get coffee with real gold mixed into it. It’s part of this trend of edible gold. People are mixing gold into all kinds of foods — even beer and chicken wings. Like I said last week, I think people like to eat gold because it seems indulgent and decadent. Not my thing, but I get it. But you know what? There’s a more pragmatic reason to eat gold.
Transportation.
US stock markets plunged Wednesday, shedding over 800 points. Could the be the popping bubble Ron Paul recently said was on the horizon? That remains to be seen. But equities in many emerging markets have been shedding value for several months. Take India for instance. As a recent article in the Economic Times of India put it, “Asset classes are in a state of churn. One look at the chaos in domestic equities is enough to suggest that not all is well with this segment.”
So what are Indian investors doing? Buying gold.
After hitting their highest level in 15 months in August, analysts expect Indian gold imports to continue climbing in the fourth quarter.
The flow of gold into India hit a 15-month high when it more than doubled to 100 tons in August. Demand started climbing in July when imports jumped for the first time in seven months.
The Reserve Bank of India (RBI) bought gold for the first time in nearly a decade during its last fiscal year.
The Indian central bank added 8.46 tons of gold during the fiscal year ending June 30, according to its latest annual report. The additional yellow metal brings India’s total gold reserves to 566.23 tons.
The last time the RBI bought gold was in November 2009. The Economic Times of India called the central bank’s decision to add to its gold reserves “significant.”
