With a bearish gold market, investors are losing their nerves. Many already bet against the precious metal. But, some can see further than the negative (are pretty naive) forecasts that are pretty common on the internet. The low prices are just an effect of the investors taking odd decisions.
Surely you already hear or read that “gold is the preferred safe-haven during financial crises”. Well, there are several crises going on worldwide but, this time investors choose the growing United Stated Dollar. The usual behavior wasn’t followed. So, prices are dropping.
Despite all the drama produced by the falling gold prices, great things are occurring in the precious metal’s industry. Two countries are the main characters of the good news: Australia and India.
More Investments In The Search Of Effectiveness
With an everyday-stronger US Dollar and a dropping Australian currency, gold miners have found the perfect opportunity to boost their profits. By now, the taken decision was to make several investments. Investments seeking major efficiency and better opportunities. This money is now destined to expand their projects in a smart way, taking advantage of the actual low costs of exploration and technical studies.
Mr. Jake Klein, chairman of Evolution Mining, said to The Australian Financial Review that “in a strange way the tougher times get, the more opportunity presents itself.” Said that, many big miners are now buying promising projects with 150.000 – 250.000 ounces-per-year estimations.
If gold prices go up in the next months and the Australian Dollar remain low, domestic companies would get extremely high profits, allowing further purchases and technical improvements.
India’s Growing Importation
These days, India seems to be the gold’s savior. After China’s market collapse, Asian imports decreased in a relevant way but, the Hindu country still buy gold in big quantities and the demand keeps growing. In fact, it’s calculated that 400 metric tonnes were imported to the India since the start of the year. That represents an increase of 100 metric tonnes from the same period of time the past year.
What seems odd is that the demand keeps growing despite reports about massive inventories of the precious metal. Local experts declared to the international media that dealers and jewellers already have huge stockpiles of gold. Some think that is because the Hindu festival is coming and the merchants are preparing themselves to this season.
But dealers and jewellers have the minor representation on the demand scale. 60 per cent of the gold’s importations and consumption belongs to the farmers. Hindu farmers rarely have a comfortable access to the nation banking system. So, they use the precious metal to store their wealth in a way they see appropriate.
Back to the commerce topic, the Hindu festival season represents the most volatile period of gold consumption in India. Thanks to tradition and family rites, gold sales sky-rocket during this time of the year, which starts in September. That can be a good reason of why dealers and jewellers are demanding and hogging all the gold they can afford in times like these when gold consumption is low.
As always, gold doesn’t remain low for many long. Yes, gold prices are falling. But, with severe financial problems in sight, investors will think again. By the other hand, the mining industry is getting more effective at the same time that cost is dropping. Australian miners can (and will) use that domestic surplus to take a step further is their business.
Aligned with miners’ desire, Hindu traditions take relevance again (according to local observers), which can make India the biggest gold importer in the world in a few years in the future. The financial world must remember: gold always survives.