India: Gold Premiums Exceed 21%, Gold Price Near All-Time Highs

Not so long ago, we visualized Jim Rickards his saying “gold is always rallying somewhere” with some gold price charts in several major currencies. His statement makes sense of course as we are at the early stages of the third major currency war in history.

After the dollar, euro, pound and yen, it is now gold in Indian Rupees that is about to make a new all-time high. Adding the local gold premium to the gold price, Rupee gold is the most expensive ever.

The Indian government has taken close to 20 measures in the last two years to discourage gold purchases and gold imports. That has “supported” the rise of the gold premiums. In particular, the import duty which was raised to 10% in August had a significant impact.

The following chart shows the gold price in Indian Rupees and in US Dollars (see upper part), and the gold premiums in India (see lower part). Chart courtesy: Goldchartsrus.

Indian_Gold_Premiums_vs_Gold_Price_November_2013

It is known that the Indian government has been discouraging their citizens to convert Rupees in gold because of the deteriorating current account deficit. Meantime, the Rupee has lost its value to the extent it was temporarily collapsing during the summer. The following 3-year chart shows the US Dollar / Indian Rupee ratio. The Rupee is close to its all-time lows; it is no coincidence that Rupee gold is near its all-time highs.

Indian_Rupee_November_2013

The inflation rate in India stands at 7%, which is the average rate since the 80ies. The money supply is hardly growing. Indians look at gold as a “love trade” rather than a “fear trade” or inflation driven trade.

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