In February of this year, India imported just $3.48 billion worth of gold. In March, all a sudden, India imported $4.17 billion worth of the precious metal, which is a 329% increase from the $973.0 million worth of it that India imported in March 2016. (Sources: “Quick Estimates For Selected Major Commodities For February 2017,” and “Quick Estimates For Selected Major Commodities For March 2017,” India Ministry of Commerce and Industry, last accessed May 18, 2017.)
In April, $3.58 billion worth of gold was imported into India, which is up 211% from the $1.23 billion worth of the yellow metal that the country imported in April 2016. (Source: “Quick Estimates For Selected Major Commodities For April 2017,” India Ministry of Commerce and Industry, last accessed May 18, 2017.)
What are Indians doing with all that gold?
Remember, in late 2016, how the Indian government suddenly decided to make the 500-rupee (US$7.75) and 1,000-rupee (US$15.50) paper currency notes invalid? The term coined to describe the situation was “India’s Demonetization.” This action made headlines around the globe.
We could be seeing the effects of that.
Indian citizens could be thinking, “What if something like this happens again? Maybe we should hoard gold.” If this type of logic spreads, the importation of the precious metal into India could double—or triple—again. Of course, this will have a very positive impact on gold prices.
Gold Demand: Driving Factors
Dear reader; in the short years ahead, the precious metal will become even more in demand and, thus, more valuable. The United States is the only country in the world raising interest rates. In the remainder of the world, governments are 1) keeping interest rates very low; 2) dropping rates further; or 3) printing more paper money—any combination of which is inflationary and, therefore, good for gold.
Yes, demand in India for the yellow metal is strong. But so is the demand in China, at world central banks, and by investors here in the U.S., as evidenced by continuing strong sales of gold coins at the U.S. Mint.
Gold Prices & Gold Stocks
When I look at gold today, I see its price—considering all the geopolitical risks that the globe is facing—as cheap. In particular, I continue to believe that the shares of senior and junior gold mining companies are a bargain.