Will the increasingly prosperous economies of China and India affect the price of gold? Also, what kind of affect (assuming and affect)?
Both countries are already top consumers of gold but however that may actually come down as we see people moving invest in other consumer products and property rather than save or buy jewelery. Also keep in mind both countries growth is slowing and have revised gdp numbers for 2012 below estimates.
That is an interesting thought, but I was thinking that as those who did not have extra disposable income that, as they do, they will buy gold jewelery, something important culturally, but out of reach in the past.
They are increasingly on the way down economically. The BRIC nations will follow the Euro-Crisis in my opinion. Most emerging nation ETFs and mutual funds are doing worse. The culture here is for new fast cars and computers, but it is being changed whether we like it or not. Many of the new threads on India and PM are from Indian sellers. IMO.
From what I am reading thus far, perhaps India purchased a lot of gold over the past few years and now needs to unload?
The jewelry are bought for religious and marriage reasons' so it is unlikely they will sold off before other assets are liquidated, also the poor will likely be more affected by the slow down than middle class because they rely on gov subsidies. But yes it is possible gold consumption will decline if there is slow down but question is will gold consumption increase in other countries make up for slowdown in India/China (UAE, Russia, Vietnam etc).
I have thought about that, but I believe that gold is more important in some countries because of culture (i.e. marriage and religion already cited). I think other developing areas will want gold, but I think they will want consumer products more. I do not think they will take up any slack left by India and/or China.
If by slack you mean having a voracious appetite instead of an insatiable appetite, then I could go for that. Buying less is still buying. China's growth is at 7.6% and people say that like it's a bad thing. They're not easing nearly as much as the US/EU/Japan block, because they want a stronger currency that can purchase more gold. Regarding the original question, I would say that they will likely do their best not to impact the price of gold until their buying spree is completed. If anything they are happy to keep it down for the time being. There's no reason physical supply and demand will ever take precedence over prices dictated by paper contracts until such time as there is a metal shortage. With gold there is virtually no risk of a shortage because all the gold ever mined is still accounted for, and much of that is not audited anyway, whether that be if it even exists or if it is filled with tungsten. If (US) demand can be met by proxy then why would the price change? We're doing them a favor which is probably the only reason why they haven't pulled the plug.
China's reported growth is 7.6%, but according to Jimmy Rogers on CNBC, China, India , and Russia are in worse condition than reported, and he claims he is shorting all 3. This is a man who actively travels in the countries and has solid credentials. I don't always agree with him on commodities, but he doesn't say he is always right either. China admittedly has strong financial control of their people currently,but the questions is if the old timer politicoburo retire/die, if it will be continued. IMO.
What do you mean by your cars and computer comment and are you talking about u.s. or Asia? Also how does that relate to pm or Asian growth.
I was answering the tone of Lonegunlawyer's comment on culture driving purchases (below quote), by comparison that for many years , new fast cars and new fast computers/electronic devices, etc. were the "cultural" aspect" of the US, and this is changing due to economical and technological developments in the US. LGL: When the economic continuation of financial problems becomes the more important aspect of India's, China's, etc. citizens ability to live ( in poverty or outside of it), they will not spend their funds on a cultural PM buying event rather than food or housing, etc. Their culture will change also. IMO.
I did not think about it quite the way desertgem put it, but I think he is making good points (not because he is a moderator).
I ended the post with IMO, as there are many opinions, I think even within China and other countries themselves. China seems to be trying to firm up their currency, but one must wonder if it will be at the expense of the non-government owned companies, whereas the US tries freeing up currency and hoping the push on companies will raise employment and slowly bring us back to better times. Euro? Who knows, I certainly don't. I see them as more of a wild card economically than anything else, but that is where I think one should watch for PM movement. IMO. I wasn't a moderator for my first 5000 posts, then after I was appointed, my post numbers dropped by half
Here is a different perspective. China & India have a population of 2.5 billion people or close to 1/3rd of the world's population. Let's call these people the 1/3rd. Growing numbers of the 1/3rd have disposable income. The 1/3 have a cultural and practical distrust of fiat based banking. They value hard financial assets. There is relatively little gold in China & India. It's either undiscovered and/or the West stole it over the centuries. Instead, the vast bulk of the world's gold is held in the USA & Europe. So what about the West? The USA, EU, Switzerland & Canada have a population 850M or a little more than 1/9th the world's population. Lets call these people the 1/9th. Increasing numbers of the 1/9th finds itself burdened with too much debt & decreasing incomes. The 1/9th is now completely vested in fiat based banking and for generations have little understanding of hard financial assets. They gladly sell these assets to support their lifestyle. Most importantly. The 1/3rd without gold now produces huge amounts of products and services to needed to support the lifestyle of the 1/9th who have the gold. It shouldn't be hard to see how this ends up. How fast prices are driven up by it however are another matter. It is hugely dependent upon how hard the 1/9th holds onto its gold. (and silver too for that matter). I'm thinking, right now and present company excluded, that vast majority of people in the USA don't care too much for the gold they hold. They gladly take their gold items to the C4G places and hand it over for some pretty pieces of paper with pictures of dead presidents on them. They have no care that this gold is being recast into bullion to be snapped up by the crowds of the 1/3rd. When the day comes where the 1/9th stops selling its gold to the 1/3rd, is the day when prices will skyrocket. (well..... it probably won't happen in just one day)
The effect of prosperity may be counterintuitive. People tend to hold gold as a defense against a weak currency and confiscatory government. As economies develop, modernize and the standard of living increases, people may feel less of a need to own gold and may move toward more traditional investments. This is more of a psychological issue than an investment issue. In truth, I don't think anybody knows.
As much as i love to believe things have changed a lot at least when it comes to India. So even if it becomes richer gold consumption may not necessarily increase and might even decline. Few reasons: Arranged marriages are declining (keep in mind gold is purchased by parants for their daughters) Younger generation (20-30 yr) are more emulating western lifestyle. Real estate is hot trend and everyone is throwing money into that. Not safe to store gold or any valuables for that matter, crime is sky rocketing in cities and as is corruption (criminals get away thanks to connections). Lack of accessible SDB is big factor. It is people in rural areas and older generation that are primarily buying gold.
to I think China much more then India is deliberately trying to not only influence the gold and silver market, I think they are trying to destroy it. I brought this theory up last week but it sorta got blown off. About 4 to 5 years ago, China flooded the coin market with fakes. What the government and others did was slapped them on the hand and told them to stamp replica on them. So they did for a while. Then they improved the situation where the government stepped in and said it was "counterfeiting" and prohibited them from being imported. Now the Chinese are producing silver and gold ingot bars that weigh correctly, pass the magnetic test and acid test. They are flooding the market with them. The problem is, no one can stop them. This is a violation of patent infringements and that means, the company who's bars are being copied will need to take them to court. An international court. This can take years, but once the market is flooded with these bars, what will that do to the value? If people take the time to see what other industries have already been affect, it is staggering. It may reach a point that for every 1 good bar there may be thousands of fakes. So who is going to buy your bar and for how much? Just my thoughts.
