Gold Rush
8 Oct 2008, 0003 hrs IST
timesofindia.indiatimes.com
At a time of crashing banks and flailing investor confidence, people the world over are betting on human history’s most enduring symbol of power,
prestige and surety: gold. It’s in such demand that stocks are running out. The US Mint recently suspended sales of 24-carat American Buffalo gold coins, after limiting sale of the 22-carat American Eagle version.
London’s ATS Bullion says the queues are unprecedented. The Krugerrand, a sought-after coin, has been facing excess demand. Big players in gold and silver-backed exchange traded funds reportedly contributed to the supply crunch: they now sit atop a huge 1,054 tonnes of bullion. Miners and refiners have been struggling to meet orders — that’s the message from the World Gold Council.
The story isn’t different in India. Wall Street’s tremors are reverberating here in the form of stock market plunges, IT industry jitters and FII flight. In the face of falling commodity prices, it is good news that gold remains a safe haven. True, price volatility needs budgeting for and, as is being warned, indicates investor insecurity rather than gold’s value as a sure bet. The call for caution is unlikely to deter Indians, especially during the festive season.
Even the gold control days of the sixties — India had the world’s largest gold market till 1962 — didn’t kill buying in this country. So today’s gloomy scenario is unlikely to. If anything, Indians have reason to smile about a traditional penchant that cuts across classes. They are the planet’s biggest consumers of the yellow metal.
The West’s current bullion-chasers are perhaps unaware that over 65 per cent of yearly gold purchases in India is made by the rural poor — talk of rustic wisdom! In urban India with its growing disposable incomes, gold has had rivals in stock market shares and consumer goods. But it has never really been dethroned from its perceived spot as a solid investment option.
This perception can only heighten at a time financial capitalism’s fundamentals have been turned on their head, with privatised profits having led to nationalised losses. No one is sure how Wall Street’s financial assets will be valued, or where the process of debt unwinding will end. Hence the question whether the US government’s $700 billion bank bailout is worth its weight in gold. If today’s gold rush is anything to go by, the jury will be out on that one for some time yet. |
