When I read this editorial article, I REALLY felt good about my being long on gold. Two days later, another article would follow in a local language news paper.
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Friday, July 16, 1999
The golden path
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It is a figure that boggles the mind. An estimated 13,000 tonnes of gold, which translates into something like $95 billion dollars, is lying in India's household safes and bank lockers with its productive potential lost to the nation. It is a piece of statistics that has prompted international economists to rue this country's ostrich-like mindset.
Indians, or so the argument goes, don't trust their governments, their financial institutions, their industry, with their wealth, preferring instead to spend it on the yellow metal. Internationally, India is the largest consumer of gold. What's even more significant, the USA, the country that is second on this list, consumes only half the quantity India does.
Of course, a great part of this country's gold purchases are conditioned by social and cultural customs. Even extremely poor families are expected to buy something like 20 to 30 gm of the metal for the marriage of a child and celebration of festivals like Diwali often entails the mandatory purchase of goldjewellery.
But times seem to be a-changing. The World Gold Council has already reported a 24 per cent decline in demand for the metal within the country in this year's first quarter when compared to the same period last year. It may be early days yet to view this as a paradigm shift in consumer habits but it is, nevertheless, a very important development. From all indications, the trend will only get accentuated.
Today gold, as a source of investment, is rapidly losing its allure, provoked partly by the sharp dip in world bullion prices in the wake of some countries choosing to offload their national gold reserves in the global market. Britain has already auctioned 25 tonnes of gold last week and is expected to shed more than half its bullion reserves as part of a phased programme.
In an assessment carried in this paper on Thursday gold, which has now slumped to its lowest value in 20 years, was found to be one of the worst forms of investment, with its value not even keeping pace with that ofinflation. While inflation rose by about 8 per cent over the last decade, gold gained by an estimated 2 per cent or so.
While the lure of gold will always remain, given its eternal cultural resonance, it is time for the Indian consumer and investor to read the writing on the wall and actively consider other investment options. Money that now goes into buying a bauble that is worn occasionally but for the most part locked up, should rightly go towards giving this country's economy a boost, towards building its roads, its bridges, its airports.
These are the investments that will add a lasting sparkle to the future. In the familiar tale of yore, Midas, king of Phrygia, discovered after a great deal of personal tragedy that his capacity to turn everything he touched into gold proved to be his undoing. It is time that the citizens of this country rediscover for themselves the gilt-edged truth in this cautionary tale.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
expressindia.com
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That was the day gold established a new 20 year low (still jury is out if this is THE low. Check the date on this article also:
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Friday, July 16, 1999
Gold drops to new 20-year low
REUTERS
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LONDON, JULY 15: Gold edged to fresh 20-year lows during early European business on Thursday amid light volumes and widespread market caution on price direction, dealers said.
London gold fixed at $ 253.75 a troy ounce in the morning, down from the previous afternoon's $ 255.25 and marking a new low since May 15, 1979. Spot gold has plumbed a series of 20-year lows since Britain's July 6 auction of 25 tonnes, the launch of a plan to sell 415 tonnes of reserve gold in exchange for increased holdings of dollars, euros and yen.
Dealer reports of strengthening Middle East and Asian demand had failed to quell bearish sentiment created by known plans for reserve sales by Britain, the International Monetary Fund and Switzerland. ''The market is very short and approaching fresh lows. People were offering relatively small amounts and got relatively good responses but it still went lower,'' said one London dealer.
''People are holding back a bit, with some thinking there will be a rally to the upside near $ 256.00/ $ 257.00,'' he said, adding that any such move would likely come with US trade.
Implied one-month lease rates for gold remained high at 3.03 per cent on Thursday, off their peak near 3.90 per cent earlier in the week but well above the 0.50 per cent level prevailing before Britain announced its sales programme in early May.
On the technical front, gold looked weak. ''I am not in the very bearish camp which is talking about sub $ 200.00 levels -- I don't think we are going that far,'' said chartist, Cliff Green, with UK-based independents Trend Analysis. ''I can see moves towards $ 235.00 initially heading towards $ 250.00. Any recovery from here will be corrective,'' he said.
Spot gold was last at $ 253.60/ $ 254.00, 40 cents below Wednesday's US close while silver was three cents down at $ 5.04/ $ 5.07. Platinum was unchanged at $347.00/$349.00 and palladium was at $ 338.00/ $ 343.00, down $ 5.00 but off overnight lows.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
expressindia.com
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