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    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

India's Response To The Gold Sell Off: A Massive Buying Frenzy

Tyler Durden's picture




 

Panic, depression, rage, suicidal ideations: watching the US mainstream media, one would think that these are the prevailing sentiments among those who unlike the prevailing "developed world" speculative class, are invested most heavily in physical old - Indians, who collectively comprise the largest end-demand consumer segment for gold products. One would be very wrong.

Because while apparently it is incomprehensible to the "sophisticated" financial crowd in the US that someone may have conviction in their beliefs, and not just lunge from extreme to another, merely riding momentum and technicals like so many "professional" investors, Indians are doing precisely what a buyer should do when the price of the desired product plunges: doubling down, literally.

Bloomberg reports of the immediate aftermath to the past few days' gold plunge: "Gold buyers in India, the world’s biggest consumer, are flocking to stores to buy jewelry and coins, betting a selloff that plunged bullion to a two-year low may be overdone." Wait, so instead of jumping out off high buildings, Indians are being cool, calm and collected and... buying more? Unpossible. Do they not get CNBC in Mumbai? Apparently not: "My daughter is just six months old, but I think it is never too early to buy gold,” said Sharmila Shirodkar, a 28- year-old housewife, while displaying a new pair of earrings she bought from a store in Mumbai’s Zaveri Bazaar. “I had been asking my husband every day if prices will go down more. I couldn’t wait anymore.”

Indeed - the buying frenzy in India has been unleashed:

While the drop in gold prompted investors worldwide to pare holdings in exchange-traded products, surging physical demand in India may help stem the 17 percent slide in prices this year. The plunge after rallying for 12 straight years may make bullion more affordable to Indians, according to Mehul Choksi, chief executive officer of Gitanjali Gems Ltd. (GITG), the nation’s biggest retailer of jewelry and diamonds by sales.

 

This is a perfect time to buy as prices will only go up from here,” said Vishal Mehta, a 33-year-old garment dealer, while ordering coins from Choksi V. Naginchand & Co. in Zaveri Bazaar. “I usually buy one gold coin a month, but this time I am buying two.”

Hence the true value of the word "double down". Here is another word US "investors" can learn from the Indians - value.

“It has been very hectic in the last two days,” said Deepak Tulsiani, owner of Dwarkadas Chandumal Jewellers in Mumbai as he surveyed his 11 employees, who were busy with customers. “There has been a rush to buy gold because now people are getting jewelry 15 percent cheaper than before. It’s value for their money.”

 

Zaveri Bazaar, the largest bullion market in the country, buzzed with customers, who were browsing through collections of bangles, bracelets, necklaces and rings displayed in trays ahead of the wedding and festival seasons. Most buyers were women in groups of two or more, accompanied by a male who paid the bills.

 

Whatever be the price, Indians buy gold because it is an age-old tradition,” C.P. Krishnan, a director at Geojit Comtrade Ltd., said by phone from Kochi. “It has become an unavoidable expense during weddings and festivals. With the sudden crash in prices a lot of buying is happening across India as people are thinking of it as a golden opportunity.”

Yes: tradition! That's what the Chairman said too. And the chairman is never wrong. Even when he is selling the synthetic paper representation of that tradition and in the process allowing all those who trade on "value" and not "moment" to average down in terms of infinitely dilutible fiat paper.

Back to India:

“Some customers are still scared to buy now as they feel the price will go down more,” Chetan Ranka, owner of Choksi V. Naginchand, said after answering a call from a prospective customer on one of the four phones at his desk. “I have received more than 250 calls on Monday inquiring about the prices. Normally I get maybe 50 calls a day.”

The lower gold drops, the more people will buy.

“I had been keeping a tab on gold prices daily by reading the newspapers,” Sakshi Jain, a 39-year-old housewife, said as she held an intricately designed necklace against her neck in front of a mirror in Zaveri Bazaar. “I had some wedding purchases to make and as soon as prices dropped I came to buy.”

And the rub: once the correction is over, and prices resume their inexorable rising, the double down will become a buying frenzy, as everyone will realize one simple thing. Just because the BLS says inflation is has not arrived, it merely means the central banks, who are laboring under some $40-50 trillion in excess debt, will have no choice but to also double down. And one of these days not even the BLS' best efforts at fudging reality will fail.

Incidentally, they are already are. As the MIT's Billion Prices Project shows, there is just a slight disconnect between reality and what is being spoonfed.

Finally, for some actual numbers, we go to Bank of America which has calculated that the disconnect between the paper selloff and physical buying spree can only last so long before gold shoots right back up to $2000 as the surge in buying overwhelms the paper selling.

With prices now below $1,500/oz, we expect a pick-up in jewellery demand in the medium term and see considerable pain for miners should prices dip below $1,200/oz. As such, we believe the downside to gold prices may be limited to an additional $150/oz. In fact, we estimate that jewellery demand may become so pronounced by 2016 that prices could trade above $1,500/oz even if investors remain net sellers. Looking at sensitivities from a different angle, investors would need to buy merely 600t of gold to sustain prices at $2,000/oz by 2016, compared to non-commercial purchases of 1,798t in 2012.

And some more thoughts from BofA:

Cyprus’ announcement to sell nearly 14t of gold reserves was a key trigger behind the recent collapse in gold prices, as it raised concerns that other peripheral nations may follow suit. Given our estimate that every $45/oz represents a net sale of 100t, the move over the last two days would suggest net sales of 480t, or about 20% of yearly mine supply. In short, the market seems to have discounted the combined future gold sales of Portugal and Greece. As we believe additional gold selling in the European periphery is highly unlikely, we find it hard to fully justify the sell-off.

So please go ahead and sell. All we can say is, well, thanks.

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Tue, 04/16/2013 - 22:35 | 3459243 howenlink
howenlink's picture

My bank has newly designed procedures to deal with a day like today.

Tue, 04/16/2013 - 22:45 | 3459270 Northern Lights
Northern Lights's picture

When ever I pull out $1600 to buy some gold, the teller's would always ask me 50 questions as to why and where I was spending it.  I'm wondering what would happen if I were to pull out $1500 tomorrow and tell them to there face in a rather loud but not obnoxious voice that I was going to turn around and buy gold bullion with the money.

 

Tue, 04/16/2013 - 22:52 | 3459287 GrinandBearit
GrinandBearit's picture

Next time say:  fuck you, it's none of your business!

Tue, 04/16/2013 - 23:12 | 3459371 Clint Liquor
Clint Liquor's picture

My standard response:

Hookers and blow.

Tue, 04/16/2013 - 23:39 | 3459471 markmotive
markmotive's picture

UBS says the selloff was excessive

http://www.planbeconomics.com/2013/04/ubs-gold-drop-excessive.html

Many arguing this is a good buying opportunity.

Wed, 04/17/2013 - 00:17 | 3459507 Manthong
Manthong's picture

Unpossible  :-) .. barbaric..

buying PMs and killing fiat...

Wed, 04/17/2013 - 00:18 | 3459576 BC6
BC6's picture

God bless the Guptas and tradition.

Wed, 04/17/2013 - 03:50 | 3459838 toys for tits
toys for tits's picture

Last year, 60 Minutes did a story on the Indian love affair with gold.  It is very enlightening.

http://www.cbsnews.com/video/watch/?id=7398482n

Wed, 04/17/2013 - 04:23 | 3459855 zhandax
zhandax's picture

Ideal response to nosy banker questions; "It is for shiny presents".  The women (PC favorite for temp bank branch manager positions) love this.  Always play to your audience.  (Who knows, maybe the grey makes it sound more sincere).

Wed, 04/17/2013 - 04:51 | 3459874 Scarlett
Scarlett's picture

I got 9 today, and it's not only India: here come the Japanese gold bulls  --> http://www.reuters.com/article/2013/04/16/us-japan-gold-idUSBRE93F18I201...

Wed, 04/17/2013 - 05:54 | 3459922 WhiteNight123129
WhiteNight123129's picture

Yup, Gold is not a "trade". People of the world unite.

 

Wed, 04/17/2013 - 06:26 | 3459949 Rogue Trooper
Rogue Trooper's picture

Keep on stacking. It's nothing more than "Dollar Cost Averaging".  Like the Financial Advisor Frauds say when buying into, say, a 401K, LOL!

Be careful when out on the boat ;-)

Wed, 04/17/2013 - 06:28 | 3459951 GetZeeGold
GetZeeGold's picture

 

 

There's about 2 ounces of gold for everyone on the planet.

 

You got more than that.....you're doing good.

Wed, 04/17/2013 - 07:31 | 3460021 new game
new game's picture

world cost averaging

 

Wed, 04/17/2013 - 05:52 | 3459920 WhiteNight123129
WhiteNight123129's picture

Next time you cross a person from Indian origin in the street salute this person.

Wed, 04/17/2013 - 01:50 | 3459712 putaipan
putaipan's picture

if i was a .... swami.       ya da dee dah dah ye da dah!

Wed, 04/17/2013 - 02:34 | 3459765 Kirk2NCC1701
Kirk2NCC1701's picture

It was a good 'order' opportunity, given the lack of supply and the Indians swamping my PM shop all day.

My family's LLC cut the check for the order; for its own private hedge fund. With said assets stored privately and securely... Company policy, of course. :-)

Wed, 04/17/2013 - 07:28 | 3460014 Doña K
Doña K's picture

I am in South Africa at the moment and the largest dealer SAgoldcoin is out of bullion Kruggerands. The middle East community and the elite here have been buying with fury. I was also told by the dealer that if the mining talks breakdown, they may not have access to too many bullion Kruggerands. They charge 8% commission BTW

Tue, 04/16/2013 - 23:43 | 3459480 Schmuck Raker
Schmuck Raker's picture

A couple of articles ago (this weekend/ Mondayish) I asked, "What do One Point Two BILLION Indians think" of the recent 'correction'.

Here we can see the insignificance, in aallllll it's graphic glory.

Buy. Yo.

Hookers and Blow for the weak.

Wed, 04/17/2013 - 06:28 | 3459954 thewhitelion
thewhitelion's picture

90% for hookers and blow.  Then I'll just waste the rest.

Tue, 04/16/2013 - 22:53 | 3459294 dr.charlemagne
dr.charlemagne's picture

tell them you are going to put it in your mattress....grandpa was wrong about banks

Wed, 04/17/2013 - 01:50 | 3459714 putaipan
putaipan's picture

baba was a rollin' stack- where ever he laid his hat was his matress.....

Wed, 04/17/2013 - 02:25 | 3459766 Peter Pan
Peter Pan's picture

Tell them you are going to send it to Cyprus because they now hand out a free passport with every bank account.

Tue, 04/16/2013 - 22:55 | 3459297 YC2
YC2's picture

Um, the teller ask you what you're going to buy? If that's true it's completely unprofessional and none of their business. Its so much so that I don't believe the story, to be honest.

Tue, 04/16/2013 - 22:59 | 3459317 Frank N. Beans
Frank N. Beans's picture

anyone notice how "friendly" your local bank tellers have become?  Wanting to know how your day is going?  Wanting to know if you have plans for the weekend?  To the point of annoyance, but I'm too polite to say mind your fucking business.

and I'm sure they could really give a shit anyway

Wed, 04/17/2013 - 01:57 | 3459722 Sokhmate
Sokhmate's picture

I attest to that. although, if they got a nice pair I strike up a conversation to prolong my enjoyment.

Wed, 04/17/2013 - 02:02 | 3459732 Lore
Lore's picture

+ 50

Wed, 04/17/2013 - 04:27 | 3459864 Vlad Tepid
Vlad Tepid's picture

I've just noticed their cleavage showing more and more with every banking crisis...I don't complain.  I just withdraw more frequently.

Wed, 04/17/2013 - 05:01 | 3459886 Scarlett
Scarlett's picture

1. Find the freakest church/belief system in 1000 miles; make fake business card

2. Get the full regalia, you are now an archbishop or devil worshipper (what's the difference?)

3. For every question, you ask, kinda whispering, two or three back:  "you look like you haven't been sleeping well"; "hearing voices?"; "ever thought that salvation could be whitin your grasp?"; "thoughts of suicide?"; etc.  "Let's have a session." 

 

They will never bother you again.  Under any circumstance.  

Wed, 04/17/2013 - 06:41 | 3459964 Rogue Trooper
Rogue Trooper's picture

Yep when asked, I'm going pull out a business card with "Thetan 9, Church of Scientology". This, along with my dapper suit and tinfoil hat should at least put them off their canned script routine.

Wed, 04/17/2013 - 02:26 | 3459767 Dr. Eldon Tyrell
Dr. Eldon Tyrell's picture

Yes. 

Wed, 04/17/2013 - 03:43 | 3459832 Go Tribe
Go Tribe's picture

THey are like coffee shop clerks now.

Wed, 04/17/2013 - 05:56 | 3459924 Henry Hub
Henry Hub's picture

I have to say I haven't talked to a bank teller in years. I do everything with Internet banking or ATMs. Have to say I do miss the cleavage now the you mention it.

Tue, 04/16/2013 - 23:06 | 3459341 pan
pan's picture

It's happened to me on more than one occaision, and yes it is not professional.  Today at the drive through the clerk chick wanted to know why I had not opened a savings account with them yet.  Just keep a minimum amount of cash in the bank at all times.

 

Tue, 04/16/2013 - 23:11 | 3459368 otto skorzeny
otto skorzeny's picture

I send the withdrawal slip in-tell them i want it banded in $20s and they send it out-you guys need to switch banks.

Tue, 04/16/2013 - 23:27 | 3459426 Midas
Midas's picture

I go to the tellers for $20 at a time and increase the number of visits because all the girls are stacked. 

 

-nuff said.

Tue, 04/16/2013 - 23:32 | 3459451 otto skorzeny
otto skorzeny's picture

take out bigger amounts and you'll see those titties in the raw.

Wed, 04/17/2013 - 00:53 | 3459648 icanhasbailout
icanhasbailout's picture

It's not the size of the position, it's the duration.

Wed, 04/17/2013 - 01:58 | 3459731 putaipan
putaipan's picture

on that note.... i bank at  "       -        ",  the kind ladies there showed me how to bounce a check in the winter (as opposed to two or three overdrafts)  kind of their version of a "pay day loan".  they were most helpful.  that was last winter. doing much better this year thanks to y'all. mellly clickamaka 2013 ! by the graces of good people everywhere, and there are, we will ALL get buy. sell ammo-get dead. need i go on?

Wed, 04/17/2013 - 04:20 | 3459858 Gavrikon
Gavrikon's picture

Mmmm.   Titties . . . . .

Wed, 04/17/2013 - 07:28 | 3460015 draug
draug's picture

I can only speak from a scandinavian perspective here, but I personally haven't visited a bank in years. The bank I currently use doesn't even have tellers, just the website. I am really surprised you guys have to put up with all that crap just to withdraw some money. Bet you most of it is really sales tactics to foist insurance and other "products" on you while you're there.

Tue, 04/16/2013 - 23:19 | 3459399 HulkHogan
HulkHogan's picture

The government makes them ask those questions. They want to know if you're going to funnel money to terrorist. -God's honest truth.

Tue, 04/16/2013 - 23:21 | 3459407 otto skorzeny
otto skorzeny's picture

you guys are fucking crazy.

Tue, 04/16/2013 - 23:42 | 3459481 El Tuco
El Tuco's picture

It's true. They are suppose to report any thing they feel suspicious about their customers and their banking transactions. It only takes one bitch with a grade 10 edjumacation to say something and you have them breathing down your neck......

 

Wed, 04/17/2013 - 03:10 | 3459808 Urban Redneck
Urban Redneck's picture

Those ass-clowns don't even know what they are supposed to be looking for, much less how even fill out a SAR.

There are basically only two potential uses for a cash withdrawal (as opposed to a deposit) which would require the filing a SAR-

1) if the customer responded - I'm bribing my pet congress critter who needs the cash for his Bank of Maytag (group sex with underage Dominican hookers is actually kind of iffy since the customer could be spending the cash for his own "benefit")

    or

2) if the customer responded - I'm giving the money to a specifically designated national (an Arab saying I'm giving the cash to my buddy Osama actually wouldn't pass the test, but could justify further inquiry since there are some guys named Osama listed on the SDN list, however, since every SDN named Osama is supposedly dead, a referral for psychological evaluation, as opposed to FINCEN/OFAC, would make more sense, even though a CYA SAR filing might be in order)

"Suspicious" isn't some term meaning anything some dumb retard thinks it means.  These people to be given trips to a gas chamber or the Women's Medical Society in Phily, not given paychecks, if they can't figure this out. 

 

Wed, 04/17/2013 - 06:31 | 3459953 Fred C Dobbs
Fred C Dobbs's picture

Great idea Urban Redneck.  Let's tell everyone to answer the same, "I'm going to bribe my congressman and senator, just like the owners of this bank does".

Wed, 04/17/2013 - 06:55 | 3459972 GetZeeGold
GetZeeGold's picture

 

 

That crap really does work.....and it's pretty cost effective.

Wed, 04/17/2013 - 07:15 | 3459998 Flagit
Flagit's picture

some dumb retard

A double negative occurs when two forms of negation are used in the same sentence. For example, "I don't need no dog food." That is a double negative. Multiple negation is the more general term referring to the occurrence of more than one negative in a clause.

Wed, 04/17/2013 - 09:04 | 3460282 Urban Redneck
Urban Redneck's picture

If you want to be a Grammar Nazi, then be a Grammar Nazi, but at least get it right...

That is NOT a double negative.

Hint: What is difference between a short midget and a tall midget? 

Tue, 04/30/2013 - 01:08 | 3512830 Flagit
Flagit's picture

ya vol.

what is difference....

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