Basic Fundamental Suggest Gold Prices Could Soar to $2,000 an Ounce
This is a bold statement but one worth making; the yellow precious metal could be setting to reward investors like it did after the financial crisis of 2008-2009. Don’t be shocked if gold prices soar to $2,000 an ounce in coming years.
How could this happen?
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You see, it’s not because we are seeing another financial crisis happening (although the odds of one happening are increasing), it’s because of very basic fundamentals—demand.
Over the last two years, it’s been mentioned over and over again; pay attention to the gold buyers. They remain persistent, they could be the reason why gold prices surge.
India’s Gold Demand Remains Strong
One buyer I am paying close attention to is India.
Why?
Saying the very least, over the last two years at least, India’s gold demand has been interesting. Keep in mind, India is the second-biggest consumer of gold.
In the mainstream, we are told on a regular basis that demand for gold in India is dissipating and that the government doesn’t want Indian consumers to buy gold.
Here’s something every investor should know; ignore the noise and always look at the data.
Now, looking at data about gold consumption in India, it remains stellar. Yes, there has been a decline in consumption, but it’s still huge and it wouldn’t be surprising if it grows.
Consider this; in January of this year alone, gold imports in India amounted to $2.04 billion. (Source: “Quick Estimates For Selected Major Commodities For January 2017,” India Department of Commerce and Industry, last accessed March 8, 2017.)
Let’s do some math…
If we assume in January the average gold price was $1,150, then India imported 1.77 million ounces or 55 tonnes of the precious metal.
To give you some perspective on how big this figure is, look at the U.S. Mint’s American Eagle gold coin sale. In the entire year of 2016, the mint sold 985,000 ounces of gold in American Eagle coins. (Source: “Bullion Sales,” United States Mint, last accessed March 8, 2017.)
In other words; what the U.S. Mint sold in one year, India imported that amount in one month!
This is something investors must also know; just a few months back, India banned some of the most used notes in the country in the name of transparency. This phenomenon caused the economy to stand still.
With this, it’s not outrageous to think that the currency ban impacted gold purchases as well.
It would be really interesting to see how gold demand trends are in India in the next few months. As things are starting to calm down, gold buyers could come in full-force and start buying.
Gold Prices Outlook: Ignore the Precious Metal And You Could Be Kicking Yourself Later
Dear reader, there’s too much noise these days when it comes to gold prices.
It is important to look at the data, and not just fall for false narrative that says gold isn’t worth holding. Gold prices may be down, but they are far from being out. The yellow precious metal has a great future ahead, and fundamentals are screaming this.
Keeping all this in mind, I continue see gold price reaching $2,000 an ounce sooner than many anticipate. Ignoring gold at the current price could be a big mistake.
