Market Update: Gold, An Addiction India Won’t Get Over

The historic Kumbh Mela ended in India this week; it is said that bathing near the event clears away all of ones sins. Maybe a wise man took a bath for gold and silver, with prices resurrecting and closing at $1675 and $31.50, respectively. Indians have come under increasing pressure from their own financial minister to curb their consumption of gold, but since there is not a viable Social Security system in the country, consumption is set to continue at current levels, even if taxes on the yellow metal goes up another 6%. A lot of the purchasing may even move to the black market. China has yet to surpass India in consumption of gold and is currently showing signs of an economic slowdown. Keep a close eye on India’s financial minister’s next move; nothing fuels social instability like unnecessary taxes; just ask Algeria, likely suffering from all that under-the-table gold moving between Turkey and Iran.

Precious metals on the move

London Fix, PM price at week’s end, and change over previous Friday:

• Gold: $1,675.00, up 1.1%
• Silver: $31.50, up 2.7%
• Platinum: $1,683.00, up 3.5%
• Palladium: $725.00, up 4.5%

In the news

Gold will reach $1847 in 2013, even as India’s jewelry consumption declines
“I think we could see investment [in gold] in a number of arenas, and at a higher set of prices. Commentary on the dollar/euro has shifted in recent months from being very bearish on the euro. We don’t see much scope for dollar appreciation this year.” — GFMS’ head of research, Philip Klapwijk (link)

An ‘addiction’? Indians are savvy long view investors living without a social safety net
“The focus on the cost of India’s gold imports at an official level could be seen as a threat to what is the largest physical bullion market alongside China.” — Tom Kendall, precious metals analyst, Credit Suisse (link)

Australian prospector unearths a 177 ounce gold nugget
“It would probably be in the top ten to fifteen largest nuggets in the world that haven’t been melted down.” — Cathy Anza, Perth Mint (link)

Spotlight on Silver

U.S. Mint suspends sales of American Silver Eagle coin after annual January rush depletes stock
“What happens in Washington, Europe and China are all very relevant. And to say that what happens in January will continue for the rest of 2013, I think it’s (inaccurate) to make such a statement.” — Raymond Nessim, CEO of Manfra, Tordella & Brookes (link)

Silver beginning to gain favor over gold in India
“The trend began at the end of 2010 when silver prices started rallying to a 30-year high. The price of silver has great potential to go even higher this year. Plus, most shops have been showcasing exquisite silver jewelry items. The lure is too much.” — Surinder Singh Ahuja (link)

The week ahead

• 2-month reprieve on debt ceiling debate, but the world is ‘underwhelmed’
• Things are getting very intense in Northern Mali as the world realizes Al Qaeda has regrouped there
• Algeria in the hot seat for botching the gas field hostage mission
• President Obama is inaugurated amidst both a morning after and hang over atmosphere