Best of the Week
Most Popular
1. Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - Nadeem_Walayat
2.Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - James Burgess
3.Gold Price Trend Analysis - - Nadeem_Walayatt
4.The Beginning of the End of the Dollar - Richard_Mills
5.Stock Market Trend Forecast Update - - Nadeem_Walayat
6.Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - Troy_Bombardia
7.Precious Metals Sector: It’s 2013 All Over Again - P_Radomski_CFA
8.Central Banks Have Gone Rogue, Putting Us All at Risk - Ellen_Brown
9.Gold Stocks Forced Capitulation - Zeal_LLC
10.The Post Bubble Market Contraction Thesis Receives Validation - Plunger
Last 7 days
Is A Sharp Stock Market Crash Ahead? - 21st Nov 18
Have We Seen The Worst of the Gold Bubble Burst? - 21st Nov 18
The Real Price of LNG, Climate Change, Coming Fracking Environmental Disaster - 21st Nov 18
Powell and Gold between Inflation and Global Slowdown - 21st Nov 18
Why is the North American Wilderness Known for Spiritualism? - 21st Nov 18
Stock Market Buy the Dip is Dead - 20th Nov 18
Deep State Mad World - 20th Nov 18
Commodities - What Do You Need To Know? - 20th Nov 18
Precious Metals Moving In Unison For A Massive Price Advance - 20th Nov 18
Handicapping the Precious Metals Through Year-End - 20th Nov 18
Betting Markets Confirm Theresa May Safe From Tory Leadership Challenge this Week - 20th Nov 18
Rail Chaos Transpennine Express Cancels Services to Manchester Airport Whilst on the Train! - 20th Nov 18
The Giants Are Coming...Giants of The Internet! - 20th Nov 18
Gold & Silver Corrective Rally is Almost Over - 19th Nov 18
Stock Market Going Sideways - Which Direction is Next? - 19th Nov 18
Technical Analysis Points to DOW 30k Next Target - 19th Nov 18
Stock Market Consolidating in a Downtrend  - 19th Nov 18
Next Tory Leader, Prime Minister Forecast and Betting Market Odds - 18th Nov 18
The Fed's Misleading Money Supply Measures - 17th Nov 18
Stock Market Outlook: Why the Economy is Bullish for Stocks Going into 2019 - 17th Nov 18
NO DEAL HARD BrExit Tory Chaos, Theresa May Leadership Challenge - 17th Nov 18
Gold vs Several Key Investments - 17th Nov 18
GDX Gold Mining Stocks Q3 18 Fundamentals - 17th Nov 18
Is Gold Under or Overpriced? - 17th Nov 18
Active Managers are Bearish on Stocks. A Bullish Contrarian Sign - 16th Nov 18
Will The Fed Sacrifice Retirement Portfolio Values For The "Common Good"? - 16th Nov 18
BrExit War - Tory Party About to Replace Theresa May for NO DEAL BrExit - 16th Nov 18
Aspire Global Makes Significant Financial Strides - 16th Nov 18
Gold Oil and Commodities …Back to the Future ? - 16th Nov 18
Will Oil Price Crash Lead to “Contagion” for the U.S. Stock Market? - 15th Nov 18
How NOT to Be Among the MANY Stock Investors Fooled by This Market Myth - 15th Nov 18
Tory BrExit Chaos Cripples UK Economy, Wrecks Housing Market Confidence - 15th Nov 18
Stocks Could End 2018 With A Dramatic Rally - 15th Nov 18
What Could Be the Last Nail in This Stock Bull Markets Coffin - 15th Nov 18
Defensive Stock Sectors Outperforming, Just Like During the Dot-com Bubble - 15th Nov 18
Buying Your First Home? Here’s How to Save Money - 15th Nov 18
US Economy Ten Points or Ten Miles to ‘Bridge Out’? - 14th Nov 18
US Stocks: Whither from Here? - 14th Nov 18
Know exactly when to Enter&Exit trades using this... - 14th Nov 18
Understanding the Benefits of Keeping a Trading Journal - 14th Nov 18
S&P 500 Below 2,800 Again, New Downtrend or Just Correction? - 13th Nov 18
Warning: Precious Metals’ Gold and Silver Prices are about to Collapse! - 13th Nov 18
Why the End of the Longest Crude Oil Bull Market Since 2008? - 13th Nov 18
Stock Market Counter-trend Rally Reaches .618 Retracement - 13th Nov 18
How to Create the Best Website Content and Generate Organic Traffic - 13th Nov 18
Why the Stock Market Will Pullback, Rally, and Roll Into a Bear Market - 13th Nov 18
Stock Markets Around the World are Crashing. What Not to Worry About? - 12th Nov 18
Cyclical Commodities Continue to Weaken, Gold Moves in Relation - 12th Nov 18
Olympus Tough TG-5 Camera Stuck or Dead Pixels, Rubbish Video Auto Focus - 12th Nov 18
5 Things That Precede Gold Price Major Bottoms - 12th Nov 18
Big US Stocks Q3 Fundamentals - 12th Nov 18
How "Free Money" Helped Create Sizzling Housing Market & REIT Gains - 12th Nov 18
One Direction More Likely for Bitcoin Price - 12th Nov 18
The Place of HSE Software in Today's Business - 12th Nov 18

Market Oracle FREE Newsletter

How You Could Make £2,850 Per Month

How to "Democratize" Gold... and Give the Government a Black Eye

Commodities / Gold and Silver 2013 Nov 11, 2013 - 03:39 PM GMT

By: Money_Morning

Commodities

Peter Krauth writes: We all know that, so long as the Fed keeps the printing presses on, the risk of a worldwide currency crisis gets even higher.

Gold, of course, is the timeless hedge here - for all the reasons you and I know.

But are we truly prepared for a currency crisis?


Much of the gold in the United States is owned by big institutions: the Treasury, the Federal Reserve, and bullion banks. So, if a currency crisis hits, their 8,900-ton hoard won't do us a bit of good.

But there is one country whose "democratic" approach to gold ownership will allow its people to survive a currency crisis, literally, in fine style.

Not only that, but this country's people are giving their government a whopping black eye for its heavy-handed ways in the process.

Here's what's going on there...

India's Reserves Are Misleading

India's official, or government, gold reserve amounts to just 613 tons - merely the world's 11th largest stash.

But that's nowhere near the whole picture.

You see, of the estimated 167,550 tons of gold mined throughout all of history, some 34,170 tons are in India.

That's 20% of all the gold ever produced, in just one country.

And at today's prices, it's worth nearly $1.4 trillion.

Indians' cultural affinity for the yellow metal is world-famous.

Families gift it to the dowries of their marrying daughters.

Farmers buy every ounce they can with the profits from their annual harvests.

It's considered an auspicious gift for religious temples and festivals.

Maharashtra businessman Datta Phuge loves gold so much that he had 15 goldsmiths toil 16 hours a day for two weeks to make him a shirt made from it... at a cost of $250,000. His quarter-million-dollar ensemble makes the colorful, raucous costumes of Bollywood films look downright conservative...

At all levels of society and at all times, Indians just can't get enough gold.

So a funny thing happened when India found itself embroiled in a currency crisis...

What Currency Crisis?

From May 1 to Aug. 20, 2013, the Indian rupee lost a stomach-churning 20%, reaching all-time lows versus the U.S. dollar.

No one's felt those effects more than Mukesh Ambani, India's richest man.

He heads the parent company of the world's largest oil refineries, Reliance Industries. He owns perhaps the world's first personal skyscraper and billion-dollar private home, Antilia, in Mumbai.

But, poor Mukesh...

Thanks to the rupee's summer cliff dive, Ambani lost $5.6 billion in under four months. That's 24% of his former $23 billion fortune.

It's not because he made a bad investment. It's just that the value of his holdings in U.S. dollars was worth that much less.

What's more, foreign institutional investors with funds invested in large Indian public companies are sprinting for the exit and taking their funds out of India, further weighing on the value of those firms and the currency.

It's not pretty.

But, with so many Indians owning so much gold themselves, most will come through just fine.

In fact, they've seen their holdings increase - astronomically -in value.

Nobel literature Laureate V.S. Naipaul famously referred to his ancestral home, India, as the land of "a million mutinies." It's easy to see why.

And, in just carrying on as normal, the Indian people are actually making their government pay dearly for its own heavy-handedness.

India's "Million Mutineers" Fight Again

Record low rupee exchange rates of May through August 2013 pushed the gold price in India up almost 35% at the same time, to new all-time record highs.

In fact, Indians are buying so much gold (most of which has to be imported) that it's exacerbating the nation's current-account deficit, running at a record 4.8% for 2012.

And that's causing major headaches, which has led to desperate knee-jerk reactions.

Short of banning the sale of gold outright, the Indian government has tried nearly everything to slow gold purchases.

First they imposed import duties on gold, then hiked them three more times - all the way to 10% this year alone.

But that still wasn't enough to spoil the average Indian's appetite for gold.

Again on Sept. 17, the Indian Ministry of Finance raised gold jewelry import duties from 10% to 15%.

Now, the Reserve Bank of India wants to convince religious temples to sell some of their gold to banks.

One temple alone, the Tirumala Venkateswara Temple, has accumulated an estimated hoard of more than 1,100 tons, worth a mind-boggling $480 billion, over the past 2,300 years. Tirumala temple is only one of uncountable thousands.

They would then convert the jewelry into bullion, which could then be sold back into the market, partly relieving gold imports.
Reuters has even reported that the Reserve Bank of India (RBI) was planning to "ask banks to

offer to buy household gold and divert it to precious metal refiners in an effort to reduce India's current account deficit and improve the domestic supply of gold."

The RBI later said no such proposal was currently being considered, but as it is with all governments, a denial is often a ringing endorsement.

All that mismanagement has made Indians defiant in the face of rampant inflation. Smuggling gold cross-border into India has become a lot more prevalent.

In the first six months this year, Indians were responsible for 28% of worldwide consumer gold sales, up 48% year over year. And they certainly didn't let gold's spring selloff go to waste. In Q2, gold purchases were up 71% year over year.

For now, higher rupee gold prices and ever-increasing gold taxes may be weighing on demand. Imports have fallen considerably in the past few months.

Just don't bet on any sustained weakness. Owning gold has provided a strong hedge against a rapidly waning currency for many Indians.

The fall is typically a very robust gold-buying period. The all-important wedding, festival, and harvest seasons are quickly approaching.

Keep in mind, nearly two-thirds of gold in India is held in rural areas, where bank accounts are much less accessible. And with heavy monsoons this year, bumper crops are likely to support strong buying from the country's 200 million farmers.

Perfect Security, on Your Dressing Table

With the collapse of the rupee, it's been both wise and prudent on the part of Indians to own gold. With a central bank hell bent on debasing its fiat currency, like nearly every other central bank today, owning gold has helped Indians hedge rupee losses.

We can't be sure if Mukesh Ambani has any gold shirts hidden away in that skyscraper of his.

But we do know Indians as a whole own lots of gold in the form of jewelry and ingots. At 31,000 tons, my guess is there's more gold in India than anywhere else.

To 1.2 billion people, gold represents savings and security.

I believe at some point in the next few years, gold will eventually re-claim its role as money.

That will cause major nations to jockey for position in any new world monetary order.

And thanks to their "democratic" gold ownership, odds are good that Indians will play a significant role.

Source :http://moneymorning.com/2013/11/11/democratize-gold-and-give-the-government-a-black-eye/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules