Indian gold demand sees 2009 repeat

When uncertainty reigns, investors all over the world turn to gold as a safe haven. But some countries are starting to take issue with their residents’ preference for storing wealth in gold bars, rather than bank accounts.

One of the Fed Chairman's most memorable lines in recent history is that "gold is not money... it is tradition." Perhaps he was merely listening to the Fed's computers, Ferbus, Edo and Sigma, which we now know form the backbone of US central planning and whose DSGE model output is usually spot on until it happens to be catastrophically wrong, on the issue.

Less than 1% of the world’s gold is mined in India. The rest comes from somewhere else. Still, India can’t get enough. It is the largest consumer of gold in the world, buying nearly a third of production in recent years. Some estimates say that 10% of all gold is held in India. Indians save roughly 30% of their income, as opposed Americans, who save 5%. Plus, Indians are getting richer all the time. Once a very poor country, the rich and middle classes now outnumber the poor in this nation of 1.2 billion. The country has the sixth-largest economy in the world.

Article written by Prieur du Plessis, editor of the Investment Postcards from Cape Town blog.With gold bullion again trading above $1,750, it is interesting to pick up on some comments on the yellow metal from my friend David Fuller, co-writer of the FullerMoney.com newsletter.

ByMacro Investor:I have written a lot about how drop in Indian demand has been the main culprit behind lower gold demand and prices in 2012. Indian demand fell from ~1,000 tonnes in 2011 to ~850 tonnes in 2012. Chinese demand went up, but still was not enough to overcome the drop in Indian demand. All in all, prices for the yellow metal suffered. It seems like I was barking up the wrong tree, so to say, all this time.

As we noted last week, all around the world the demand for physical precious metals has soared in the days following paper gold's price collapse.

Article written by Prieur du Plessis, editor of the Investment Postcards from Cape Town blog.The article below is a guest contribution by Frank Holmes, CEO and Chief Investment Officer of U.S. Global Investors.

As we wondered out loud yesterday, many have questioned the disconnect between increasingly burgeoning central bank balance sheets and money printing and the range-bound trading in Gold.