Gold Forecaster - Global Watch
Indian demand... Gold... Iran

Julian D.W. Phillips
April 25, 2006

Excerpts from "Gold Forecaster - Global Watch."

Indian Demand
We have been waiting for what seems to be a long period for Indian demand for gold to return to the global market. India imports around 75% of the gold that is "consumed" there. But for the last six months imports have been down to close to zero in the fourth quarter of last year and the first quarter of this year. The recent wedding season demand was extremely low this year. There has been about 33% drop in Mumbai's daily gold consumption to 0.5 - 0.6 tonnes per day from a normal 0.8 - 0.9 tonnes per day around this time of the year. But last year was an unusual year, as demand had resumed after prices stabilised at higher levels. Doing that shows that demand has returned to roughly normal. This was the opinion of the World Gold Council.

But now there is some demand as the date for "Akshaya Tritya" approaches. Akshaya Tritya is a day considered by the Hindus as an auspicious period for the purchase of gold as an expression of measure of wealth and happiness. Since time immemorial the custom of gold buying during this period has been followed. Everybody following Hindu customs would buy at least 1 or 2 gram of Gold on that day as a token and some would buy more. If we restrict this to a family of 4 buying this amount and consider that there will be around 200 million Hindu families in India [Hindu India has a population of 861 million] buying this quantity of gold, we could see a major off-take of 200 tonnes or thereabouts. With inventories having been run down heavily over the last six months and scrap sales dropping off recently, much of this demand would have to be supplied from newly imported gold.

Gold's seasons
Akshaya Tritya this year is on the 30th of April 2006. Based on the Lunar calendar this date changes every year. Normally Akshaya Tritya falls on the 18th day of the second Hindu month called Vaisakh. In the Hindu calendar there are 12 months with none of them having more than 30 days each. Once in every four years the year is made of 13 months. Normally Akshaya tritya falls in the last week of April up to mid-May. And this is a peak period of gold demand for India, followed by a 35 - 40 day period of little demand [except unrelated investment demand] when the harvest income comes into the hands of the farming peasants. Thereafter, from July 31st, until the last week of October/the first week of November, gold hits the doldrums of little to no demand. Fortunately for gold from mid-August Europe's gold market comes back to life, after their summer holidays.

India's new gold Investors
We are receiving reports that there is a change in the pattern of gold buying in India as India's appetite for gold bars is rising at a faster rate than the growth in jewellery, according to the President of the Bombay Bullion Association. We have mentioned the general increase in the wealth of the Indian middle class who also view gold as a good investment, which it has proved for all these ones.

Jewellery accounts for the biggest part of India's gold demand, often given by parents at weddings to give their daughters financial security. Hindus also consider gold an "auspicious" metal and like to buy or give it during religious festivals.

Iran, gold and fear of the future
Facing a potential war, possible sanctions and the vilification by the rest of the world the Iranian man-in-the-street and Investor has few reliable places to go. So he's turning to gold just as so many people in other parts of the world are. But his situation is one moving from the possibility of structural ruptures to probable structural ruptures. One newspaper put it this way, when referring to gold "It's unbelievable, it seems no investment field is as safe." But the Iranian people need gold in small quantities in coin form. The quote from another newspaper there was, "Gold coins are Iranians' political hedge fund. We keep them at home and they make us feel secure."

Gold coins are now given as presents at weddings and for the New Year. Gold coins are a liquid and proven investment and at 460,000 Rials (about $41.50) a quarter, gold coins are within the reach of all but the poorest Iranian.

The alternative investment route, Iran's largely state-owned banking sector offers limited services, while all Iranians face inflation put 'officially' at 14%. And the 'acid test' investors measure by showed deposits in the state banks lost 1% in real terms in the year to February 2006 whilst Gold coins gained 21%.

"Buying gold coins reflects a lack of alternatives," says Mr Pourian. "Big investors may pull out of real estate and move their capital to Dubai. Smaller investors have fewer opportunities."

This is what can happen when confidence in the financial institutions and the economy of a country falls!

April 21, 2006
-Julian D.W. Phillips
email: gold-authenticmoney@iafrica.com

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