Gold Demand increases as physical buying of Gold in India begins today with the auspicious occasion of Ganesh Chaturthi, the first day of the 10 day festival, later soon to be followed by Navratri in October & Diwali in November. Lord Ganesha is the God of wisdom, the herald of all auspicious beginnings and also the destroyer of all evils. Gold Demand is very high in India during this period, especially for Gold coins in these festivities accompanied by the wedding season. The timely rise in INR seems to offer a great start to this festive season. Gold Bullion & jewelry has an emotional connect with people in India, and any important celebration is seen as incomplete without Gold buying or gifting.
Physical Gold Demand which has been very low in comparison to previous year due to the sharp decline in the INR – Indian Rupee against the US Dollar, may get a boost as outlook on the Indian Rupee shifts to positive. Gold Prices may melt in Indian Markets if the INR rises now against the globally weakening US Dollar. The Indian Rupee may strengthen on the back of new government reforms and that may spur physical Gold Demand. Physical Gold Demand is a major factor in strengthening the Gold Bull run which is sorely lacking till now. The other important factors other than heavier trading volumes in Gold Futures are the Official Gold Demand, that is the Gold buying by the Central Banks & the demand by Gold ETFs, all of which have seen a huge rise. The INR rise comes in at a crucial time when buyers in India normally start to build inventories for the seasonally strong period towards the end of the year. Additionally, the weather has improved in agricultural areas and it “bodes well for incomes in rural areas and increases the possibility that Gold Demand will be resilient during the upcoming festival season. Emerging-market nations, particularly those nations with positive current account balances, view the growing indebtedness in the Western world with some alarm are likely to keep buying Gold, triggering further push in Gold Demand.
Gold Demand to remain on Low Interest Rates & Global Unrest:
Precious Metals are trying their best to consolidate last week’s gains, but long liquidation from a perhaps overly bullish outlook has seen some losses overnight. Resurgent Eurozone fears, in particular over Spain’s potential request for a bailout, are putting pressure on risk assets. Most of the important market participant nations are already getting quite saturated by liquidity & this is likely to be supportive for Gold, Silver and the rest of the Base Metals. Incredibly low interest rates are likely to keep making Gold attractive due to a “negligible” opportunity costs and longer-term fears of adequate stores of value and wealth preservation. Asian Gold Demand in particular has grown dramatically, where China is expected to become the world’s largest buyer of Gold as soon as this year. European stock markets declined yesterday amid an apparent reluctance of Spain to ask for more financial bailout assistance from the European Union. There was a successful auction of Spanish short-term debt overnight, with yields lower and demand decent. A Spanish auction of longer-term debt later this week will be a bigger test, however. There was a positive economic report coming out of Germany, as the ZEW economic expectations readings was the strongest in five months. Asian stock markets were weaker on position evening ahead of important economic data coming out of China on Thursday. There were also anti-Japanese demonstrations in China that unsettled the market place inAsia. The Bank of Japan started a two-day meeting, at which the BOJ may introduce some fresh monetary stimulus.
Striking platinum miners at Lonmin’s Marikana mine in South Africa accepted a hefty pay rise offer on Tuesday, ending six weeks of violent labor unrest that killed 45 people and rattled Africa’s largest economy. “It’s a huge achievement. No union has achieved a 22% increase before,” Zolisa Bodlani, a worker representative at Marikana, told Reuters. Lonmin confirmed that the deal had been signed in Rustenburg on Tuesday night. “The agreement includes a signing bonus of 2,000 rand and an average rise in wages of between 11 and 22% for all employees falling within the Category 3-8 bargaining units, effective from 1 October 2012,” it said in a statement. In another sign that weeks of trouble in South Africa’s platinum belt were ending, the world’s biggest platinum producer, Anglo American Platinum, said it had resumed operations in the strike-hit Rustenburg area.
The conflict, most notably the police killing of 34 Marikana strikers on August 16, had also ignited criticism that President Jacob Zuma and his ruling African National Congress were neglecting poor workers and siding with wealthy business owners. The rock drill operators who began the strike will receive an effective 22% rise on their total package including allowances which will bring it to just over 11,000 rand per month. An illegal strike by 15,000 workers at the KDC West mine operated by Gold Fields, the world’s fourth largest bullion producer, continued on Tuesday as its chief executive said the firm would not agree to demands for a minimum wage of 12,500 rand a month. In a separate development, parliament approved a 5.5% pay increase for Zuma on Tuesday, taking his annual remuneration to 2.6 million rand ($315,600) a year.