When it comes to true demand for the "unfondleable" barbaric relic, one can look at spot prices (or listen to CNBC, at least when gold is correcting when it is being commented on every 5 minutes; when it has soared by $150 in 10 days, one hardly hears a peep), or one can continue looking at the absolute frenzy in the physical markets, now all over the world, where those who refuse to take their eyes off the ball, or the G-7 printers as the case may be, understand very well how this story ends. They also understand that the recent gold correction has simply been a buying opportunity, and the further the price fell, the more gold was bought until finally mints, refineries, and brokerages have run out of physical in inventory.
And unlike all those pundits who do nothing but talk (and/or "act" using monopoly money) these are people who actually put fiat where their convictions lie. Or rather, have continued to do so for a second week in a row, with a frenzy unmatched in history.
Bloomberg reports on the ground from India, the world's biggest importer of gold, where gold consumers "thronged jewelry stores across the country for a second week on speculation that bullion may extend a rally after the biggest plunge in three decades."
“We waited for sometime to see if prices will fall more but when we saw them moving up again, we decided it’s time,” said Sripal Jain, a 77-year-old silver dealer who came with his younger brother, daughter and daughter-in-law to buy gold necklaces at Mumbai’s Zaveri Bazaar. “We don’t have any wedding or occasion coming up. The rates fell, so we decided to buy"... "Some bullion dealers are asking buyers of coins and bars to lock-in price today and come two days later as they do not have much inventories,” said Dharmesh Parekh, a partner at R.V. Jewellers in Mumbai.
Nationwide daily sales of jewelry, coins and bars may be about 4 metric tons, compared with normal levels of about 2 tons to 2.5 tons, Rajesh Mehta, chairman of Rajesh Exports Ltd. (RJEX), said yesterday. UBS AG said April 23 that physical-gold flows to India approached the highest since 2008, while Standard Chartered Plc said shipments last week were 20 percent above a previous record.
“Demand has been extraordinary in the past 15 days and sales this April have been much better than last year,” Kamal Gupta, chairman of P.P. Jewellers Ltd., said by phone from Delhi.
And if demand is soaring now, just wait for wedding season: the annual peak of gold consumption in the country in which gold has been an effective currency since the beginning of time, and where gold-backed loans represent a substantial amount of credit creation in circulation, and recently hit an all time high.
Just as interesting, in India not everyone is a momentum speculator, like the few remaining stock traders in the western world: there one can actually find examples of that dying breed - the value investor. “Everyone is thinking that they will miss the bus if they don’t buy now as prices have started moving up,” said Ramesh Pahlajani, partner at Mumbai-based Bherumal Shamandas Jewellers. “Demand has been very good since last week.”
To be sure, those who have an angle are also getting involved: "Gold will rally to $1,800 an ounce by December as skepticism over the global recovery increases demand, billionaire Indian jeweler T.S. Kalyanaraman said on April 19. The metal hasn’t traded at that level since November 2011. Prices may climb to $1,550 within six months on physical and investment demand, according to Mark Pervan, global head of commodity strategy at Australia & New Zealand Banking Group Ltd. "
All this means that India is merely yet another place where one is greeted by "No Gold" signs in the windows of gold retailers, as the disconnect between the price at which miners can make product, the price at which it is sold into retail hands, and where the futures based market implies it should be, have broken all supply/demand linkages.
The rush to buy has led to a shortage in India and jewelers are paying premium of as much as $10 an ounce compared with $2 just 10 days earlier, said Bipin Jain, owner of Vimalson Jewellers and a vice president of the bullion association.
“Three days ago there were queues to buy coins and bars,” Jain said from his shop in Zaveri Bazaar, the largest bullion market in the country. “Demand has slowed a bit from then but buying will remain strong till Akshaya Tritiya.”
And speaking of Akshaya Tritiya, it is just three weeks away, when gold demand is really set to explode:
The Akshaya Tritiya festival on May 13 is considered by India’s more than 900 million Hindus as the traditional day to buy precious metals. Gold is bought during festivals and marriages in India as part of the bridal trousseau or gifted in the form of jewelry by relatives. The main festival season runs from August to October followed by the wedding season from November to December and from late March through early May.
“My sister-in-law is getting married and I have advanced buying because of the recent price fall,” said 33-year-old costume designer Praveena Saleja, as she examined a 350,000- rupee ($6,460) necklace studded with gems. “Prices will rise again. Nowadays the designs are more trendier so I can pair them with western outfits as well as Indian.”
Saleja said she considered gold as a long-term investment and was not deterred by the price slump.
What a refreshingly logical assessment.