Foreign Demand Is Good For Gold's Bottom Line
Since gold prices peaked in 2011 it seems like everyone has been waiting for a return to another gold bull run. Finally, the headlines are starting to look good for gold with some major shifts in gold markets pointing to higher gold prices.
You can find information about many of those factors on other posts on the Silver Gold Bull blog, but this piece will focus on a very interesting development: foreign demand for gold. The Russian Central Bank has been aggressively increasing its gold reserves for the past ten years and 2017 was one of the largest gold buying years yet. Meanwhile, consumers in India look they have an increased appetite for gold jewelry. As your online gold and silver dealer, we want to make sure you’re in the know. Here’s what’s happening with gold in foreign markets.
Russian Central Bank Buys Gold
Russia produces about 250 tons of gold every year. Of that, the central bank has been purchasing 200 tons annually. Buying domestic gold rather than picking it up on the market has been a cheap way for the Russian Central Bank to massively increase its gold reserves, so that it now has 17% of all gold held by central banks in the world. From a peak of over 2,600 tons, Russian reserves fell to just over 300 tons of gold during the crisis of the early ’90s and Putin has been working hard to change that.
Gold Market in India
India is one of the world’s largest gold markets along with China. Demand is driven by gold jewelry, which is widely used in wedding ceremonies and fall festivals. Gold jewelry isn’t entirely ornamental either. For rural families with little access to financial services, gold jewelry is also a significant family investment.
While demand for gold in India has waned in recent months, the outlook for future consumption of gold jewelry looks good with the 2018 budget now in place. With an election around the corner, India’s Modi government put out a budget meant to please. The tax on gold imports will remain stable, easing fears of an increase that had caused many jewelers to sell gold at a discount, and there are hopes that a custom duty on gold could see a 10% reduction. Meanwhile, the Modi government has also promised money to benefit Indian farmers. With 60% of that country’s gold demand coming from rural areas, that’s good for jewelers and good for gold investors here in the West.
Late this summer, expect to see the gold spot price increase from wherever it’s been. The late summer and early fall are when jewelers in India start to ramp up inventories in preparation for a busy wedding season. You can prepare for the price increase by picking up gold bars and gold coins from Silver Gold Bull ahead of time.
There’s also been a significant uptick in silver investing, seeing a 600% increase over ten years. If even 10% of gold investing in India shifted to silver, global silver mines wouldn’t be able to keep up with demand. Keep your eyes peeled on the silver spot price silver spot price if Indian silver investing takes off.
It always pays to be prepared. You can take advantage of rising gold demand overseas by investing in gold with Silver Gold Bull today. Your ROI often has more to do with the price point when you entered the gold market than when you sold. Don’t buy too late.