|By Jeff Clark, Senior Precious Metals Analyst
There are lots of reasons silver is poised to rip higher over the next few years. Here’s another one, and it’s a new development that’s flying under the radar of most investors…
Indian citizens buy a LOT of gold. Macquarie bank estimates that 78% of India’s household savings are held in gold, more than any other economy in the world. Right or wrong, this much savings in gold creates a drag on growth, because the available funds for bank lending decrease.
So as you probably know, the Indian government has been trying for years to curtail demand. Just since I’ve been a precious metals analyst, there have been three separate gold monetization schemes offered by government officials. Deposit your gold in the bank and we’ll pay you interest! goes the offer.
The first ones didn’t really work, partly because the rate of interest offered was too low. But the Indian government didn’t give up, and their recent efforts have started to make a dent in gold demand. Not only has the most recent monetization scheme been more effective (due in part to higher interest rates), but the government’s demonetization of 500 and 1,000 rupee notes last November has had an impact, too.
Demand figures for 2016 are now trickling in, and Indian gold imports for 2016 were 570.8 tonnes, a whopping 44% decline from 2015. This is a 13-year low.
Most analysts expect gold demand to stay down, too, as this commodities specialist points out:
“The physical demand aspects will be completely bad for 2017. For the first time Indians will be trying to buy gold cashless. That’s a big challenge.”
So, will Indian citizens stop buying gold?
Returning to Their Heritage
Indians won’t stop buying gold. But demand could certainly remain subdued if government interference remains at the level it’s at.
So what will Indian investors do?
- They will buy silver instead.
How do I know they’ll buy silver?
Two reasons. First, because they already are: