If you are at interested in investing in gold, then you will want to keep a very close eye on the Indian market. Here’s why.
India buys more gold than any other country in the world. But they will only buy when they can get bargain prices on the precious metal. When speculative buyers in London or New York start bidding up the prices, which is what has been happening this year, then Indian buyers just step back and wait for the inevitable correction.
When gold prices rose by more than a third from January to September, starting at $1,000 and stretching all the way to $1,350, India slashed its gold imports by more than half. Instead of the 658 tonnes bought during the same period last year, only a measly 270 tonnes were imported through September this year.
Of course, this moratorium on buying caused the prices to plunge into heavily discounted territory, until they reached a level that buyers in India considered acceptable. Apparently the recent drop to $1,250 an ounce has met with approval, because buyers in India are beginning to re-enter the market with a vengeance.
The price of gold in India’s market has now actually surpassed global benchmark prices. While the sellers in Mumbai’s Zaveri Bazar had been having to settle for prices more than $50 below the average selling price worldwide, they are actually getting a dollar or two more per ounce more.
The return of India’s buyers to the gold market after a long hiatus like this is usually seen as a signal that prices are starting to bounce from the bottom. So those familiar with this sector believe that gold will be stabilizing during the next couple of months, and there might even be the possibility of a new rally.