India forced to take its eyes off gold
Gold demand typically peaks around now as Indian consumers load up on gold ahead of Diwali.
In response, gold shares on average have gained 2 percent one week ahead of the holiday. But we aren't seeing that big move in gold this year. Shares of the metal are down 1.4 percent this week, ahead of Diwali, which is being celebrated Nov. 3.
Analysts and gold gurus are predicting that demand in India will be weaker this year as consumers battle a slowing economy, rising inflation and a depreciating rupee.
"You can bet that with the current state of the economy, Indians will be buying less gold and looking for alternative gifting options this Diwali season," says Arvind Panagariya, professor of economics at Columbia University and India observer.
So if Indians aren't buying gold, what are they buying?
According to the local merchants in New Delhi and Mumbai—silver. It might not carry the same prestige and status, but it is cheaper and thus a good alternative. Silver shares [sic] trade at $22 an ounce, while gold shares [sic] are trading north of $1,300.
Merchants are seeing strong demand this season for silver coins, up about 10 percent to 15 percent year-over-year, according to BNP Paribas Securities in India.
BNP in India Executive Director Neil Nathwani said that with the economic slowdown, sales of dried fruits have surged....MORE
