2008Apr Gold Rejected in India?
2008Apr Gold Rejected in India?
Indian consumers buy about 25 per cent of the world's gold, the vast majority of which is imported, making the country the largest market for the metal…. But with the recent volatility in gold prices, which have hit more than $1,000 per troy ounce, investors have become nervous and sales of gold in India have fallen sharply. Demand for gold in India plummeted 64 per cent year-on-year in the fourth quarter after growing 40 per cent in the first three quarters of last year….
Even families of marrying couples, traditionally obliged to drape newlyweds in the precious metal, are passing on family heirlooms instead of buying new gold.
The raging bull market in gold continues, but for how long? Gold, unlike most other commodities, has no real industrial purpose. It’s purchased for jewelry and as an investment. But how attractive of an investment is gold at $1,000 per oz? The truth is, no one knows. You can’t apply a pricing model to gold because it has no earnings and pays no dividends. In fact, it pays negative dividends, as you typically have to pay to store or insure it. Our guess is that once the dollar regains its footing, gold will lose its attractiveness as an asset class, much to the benefit of Indian brides and grooms.
