All investments follow the same core rule – buy low, sell high. The same is for gold and silver investments.
Gold jewelry market shows good potential to recover
According to the World Gold Council, global jewelry demand, which makes up half of annual gold demand, was down 21% year-over-year in the third quarter. This was driven by decline in jewelry demand in the world’s two largest markets, China and India which collectively account for 60% global jewelry demand. Demand for jewelry in China dropped year-over-year approximately 27% and 41% in India. It is expected that 7-year low in China and 13-year low in India will recover in 2017.
This unprecedented weakness of Indian was mostly due to these factors:
1. Currency crisis in India, where big currency bills were banned by government overnight.
2. Tax hike on import of gold in India in 2016
These factors are highly unlikely repeat themselves in 2017; so it is very likely to see gold price go up to 1400 dollars per ounce.
Factors that affect the demand for gold in India:
LONG TERM FACTORS:
Forecast for Indian population increase to 1.5 Billion people by the year of 2030. The Indian middle class is expected to rise to 547 million people by the year of 2025.
*The rise of the young, Indian, middle-class worker is expected to lead to increased gold demand.
*Gold demand and household income – For a 1% increase in income, gold demand rises by 1%
*Gold demand and Gold price – For a 1% increase in prices, gold demand falls by 0.5%
*Indian culture supports gold demand across religions
*As the population becomes more urbanized, earning power increases.
*Higher household incomes boost gold demand.
SHORT TERM FACTORS:
*Inflation- For a 1% increase in inflation, demand increases by 2.6%. (Investors around the world turn to gold to protect against inflation. India is no different.)
*Gold price changes – For a 1% increase in gold price, demand will decrease by 0.9%
*Excess rainfall – a 1% increase in monsoon rainfall above the long-run average, boosts gold demand by 0.5% (A good monsoon can increase crop yields, sweep money into the rural economy and boost gold demand)
Thus in conclusion, the socio economic situation in India is projected to push the gold prices higher. Have you preserved your money by investing it in gold yet ?