News Analysis: Chinese Gold Purchases outperform those of Indians in part due to a Import Restrictions imposed by the Indian Government. Efforts have been made to stop Smuggled Gold entering into India. This effort, conjoined with the currently ‘high’ price of the metal, has kept the average Indian Citizen out of the market. In China, its people are acquiring the Precious Metal at a higher rate than that of their Good Neighbor to the South.
Investors should evaluate at least Two Important Elements involving the Price of Gold. First, The current ‘Controlled Deflation’ Policies of Governments have all but eliminated CURRENT inflation; it being the “Touted” Reason to buy gold, some say. People understand that Paper Money can have vast Supply Increases by merely printing more [It is merely assorted fibers and ink] . While this activity is Inflationary, it temporarily solves monetary problem for Politicians [who are typically of ‘Short-Term’ Outlook].
If some Monetary Policies of Nations of Profligate Spending continue, Inflation results. For example, the “Beating of War Drums” which occur regularly for and in the Middle East are conducive to acquisition of Armaments by Governments. Such equipment is Exceedingly Expensive. Even the mere stationing of One Soldier in a War Zone in another country has a cost of approximately $1,000,000.00 per year! Smart National Leaders forgo costly Military Expenditures for “Dollar Diplomacy” [Wisely, they use a “Buck” rather than a ‘Bayonet’ to Achieve Their Goals; it is less costly].
Second, the Historic Value placed on Gold [as well as its current price] have led many countries to stockpile the metal continuously. Gold’s availability is known to be Finitely Limited and therefore has Historic Value and Present Value relative to World Demand for it. At a minimum it can be: fabricated into various saleable forms [such as dental crowns]; used in other products [especially electronics]; and, even Eaten.
As Asia increases in wealth, its citizens will most likely purchase Gold for Jewelry and Investment. Eventually, Gold’s value will also increase if Monetary Policies of Nations of Profligate Spending continue.
Having some Physical Gold in one’s Portfolio is a most conservative ‘Play’. To those more trusting individuals, Stock Certificates in Gold Producing Companies can add Long-Term Value to their Investment Assemblage.
The World Population is steadily increasing beyond its present 7,141,000,000 People. The fact that they may be chasing the “Sixty-Eight Foot Gold Cube” [171,300 Metric Tons in Circulation today], bodes well for the Future Value of Gold. Reality.
Reference: http://www.dnaindia.com/money/report-china-may-topple-india-in-gold-demand-1919338