Gold is Being Helped by FED’s Hesitation and Strong Monsoon in India

Seems like the gold rally is far from ending. After a promising economy report from the FED, investors and analysts felt the need of having more faith in a short-term interest rate increase.

Because of these feelings, many thought that gold was going to lose its momentum overnight. So far, these forecasts are resulting wrong and misleading. The mere base of the forecasts, a possible interest rate increase from the FED, is getting weaker.

The expectations are now different. July meeting was disappointing for investors who wanted to put their money in the US Dollar and its economy. Policy officials from the Federal Reserve showed hesitation and questionable intentions on increasing the interest rate.

Overseas investors see no better alternative than gold, either physical gold bullion or gold futures. They know that poor expectations of seeing the interest rate going up will hit the currency hard, making traders look away.

Eastern Gold Stimulation

While the FED is doing an amazing job to maintain the gold rally going, India is adding its own factor to the formula. A strong monsoon in the country this year is doing a great favor to the domestic economy, which is giving a lot of acquisition power to the population.

In an article published by Forbes, Indian’s gold fever is explained with no conditions. “Since before recorded human history, the people of India have had an insatiable appetite for gold, treasuring it not only for its flawless natural beauty and religious significance, but also as a superb store of value”, says Mr. Frank Holmes, a Forbes’ contributor, at the beginning of the text.

There are plenty of reasons why India is the second gold consumer in the world. Above you will find the most relevant, perfectly explained. Now, with a good monsoon, the countryside population is now prosperous and well-off, at least for this season.

This same population, who are practically the farmers, represent a third of the overall Indian demand for gold. They have a poor access to modern banking systems, so they need gold to store their wealth.

The same article shows a highly educational infographic about the whole process India lives around weddings and gold. According to public sources and data provided by the Indian government, around 150 million weddings will take place between 2011 and 2021.

It’s true that we are 5 years after 2011, but before reaching 2021 we will have 5 more years of weddings. Regarding the budget of an Indian wedding, around 40 percent of it is destined to purchasing gold.

Remember that they have a close relationship with the precious metal because of their religious beliefs. So, weddings involve a lot of gold. The same infographic tells us that between 20 grams and 2 kilograms of gold are used in every wedding.

The Right Time to Buy Gold

Timing is such an important thing for traders, as you may already know. This same gold rally is a matter of time. The FED is not capable of raising interest rate in the short-term, so investors are pushed towards other alternatives.

The Indian factor in the formula is also a matter of time. Gold prices aren’t slowing down. While some analysts are telling people that the rally is about to be over, India’s schedule for weddings tells us another thing.

Wedding season in India will begin on November 11, 2016, signalling a surge for both manufacturers and local jewellers selling gold jewellery. The strong monsoon will only make this season more ostentatious and prosper.

Also, the gold jewellers’ strike could be facing its end in the following weeks because, after all, they are businessmen and women that aren’t going to ignore a robust monsoon and a wedding season like the one that is coming.

Post comment