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Indian Gold Buyers Listen to America's Central Banker rather than their Finance Minister

November 19, 2013 1:40 pm
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For almost two years, P. Chidambaram, the Finance Minister of India, has done everything possible to make gold as unappealing as possible for buyers in his country. Tariffs have been raised. But purchasing by Indians continues at a pace to set a record next year for The Yellow Metal. That is very bullish for companies in the gold sector such as Barrick Gold (NYSE: ABX), Goldcorp (NYSE: GG), Wishbone Gold PLC (OTC: WISHY), and Yamana Gold (NYSE: AUY).

Overall, Indian imports of gold are expected to be reach 350–400 tons for the April to June 2013 period, according to Sharp Pixley a Broker in London. That is 200% higher than a year ago. For 2013, Sharps Pixley predicts that the demand for The Yellow Metal in India will reach a record 1,000 tons.

While the Indian Finance Minister has been making the case against gold, America’s next central banker just made a strong case for it.

In testimony before Congress, Dr. Janet Yellen, the nominee to be the next Chair of the Federal Reserve, endorsed the continuation of Quantitative Easing III. That is a policy designed to keep interest rates low by having the Federal Reserve acquire $85 billion monthly in Treasury securities and mortgage-backed bonds through expanding its balance sheet. That should result in higher inflation in the future as trillions in Greenbacks are being created without being backed by economic growth, as detailed in another article on Benzinga, “Divided-Paying Gold Stocks are Very Alluring after Janet Yellen’s Testimony.”

When that happens, gold should rise in value.

Historically, The Yellow Metal rises in value along with inflation. Investors flee paper money for hard assets such as precious metals. From that, the price of gold and the shares of Barrick Gold, Wishbone Gold PLC, Yamana Gold, Goldcorp and the exchange traded fund for gold, SPDR Gold Shares (NYSE: GLD) should all rise.

That has not happened for 2013, though.

For the year, SPDR gold shares has fallen more than 20%. But there is good news is the sector. Barrick Gold is rumored to be the target of activist investors, according to an article in Barron’s. Wishbone Gold PLC just reported positive results for its holdings in Australia. Both China and India, the world’s two largest consumers of gold, are buying. That and more inflation should lead to higher prices in the future for gold.

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