Gold Demand In India & Dubai Surged Spectacularly in April 2013

This is a quick update on the physical demand frenzy in the East.

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According to Mineweb gold imports to India “jumped by 138% in April to $7.5 billion, massively pushing up the trade deficit. In April 2012, gold and silver imports stood at $3.1 billion.” That has accelerated the worries of the Indian government who has been fighting the current account deficit (which is the difference between inflows and outflows of foreign currency) caused by surging gold imports for many months now. The deficit touched an historic high of 6.7% of the GDP in the quarter ending December. “India’s apex bank the Reserve Bank has gone ahead and restricted the import of gold on May 13, even as jewellers were doing brisk business given the huge demand on the auspicious occasion of Akshaya Tritiya.”

Additionally India Times writes that “the sudden surge in demand has prompted the World Gold Council to say India’s imports this year will exceed earlier estimates of 865-965 tonnes, said the council’s managing director, Somasundaram PR.”

Another gold center the East, Dubai, saw demand for gold surging since the price collapse of last month, with demand far outstripping supply. Libertyblitzkrieg reports that “various estimates suggest that demand in the past few weeks has been nothing short of astronomical, surging by 10 times the normal demand.”

We have detailed the disconnect between the huge physical demand across the world and the historic pessimism among traders in paper gold products in our piece Gold – You better hold it. One of the ongoing trends is a mass exodus out of the GLD, one of the paper gold investments. As a consequence, the ETF has been selling a significant part of their physical holdings. Interestingly, as visualized by Zerohedge, the ETF continues its decline while the gold price has stopped its decline. The next chart tells it all.

gold_etf_holdings_vs_gold_price_13_may_2013

We will keep on repeating this: investors MUST hold their gold because of the out of control counterparty risk.

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