Welcome to illuminati silver, we tell youthe truth about silver.
Today is Saturday 6th February 2016 and weare producing the fourth of our ‘subscriber videos’ – and it’s by Kabir and hisarticle is entitled “Will India’s love for gold and silver slow down her economy?”For those new to this channel, we have subscribers who sign up to our website at www.
Comand one of the offers we have given our free members, is that we will, where we can, producea video for them on a precious metal or finance related topic providing they provide the text.
This is the fourth in what we hope will prove to become a most popular series.
This is what Kabir has to say: India is set to become the fastest-growingmajor economy as per the recent report by The World Bank.
According to the Report, India’sGross Domestic Product (GDP) is expected to grow by about 7.
5 % in 2016.
The growth ofIndia’s economy is attributed to a combination of factors including RBI’s inflation focussupported by benign world commodity prices and strong government reforms.
In spite of the projected growth, the economy of India may get affected by the ever-growingdemand for gold and silver by its citizens.
How does the demand for gold and silver byits citizens affect the Indian economy? Well here are the facts:-Gold is an important aspect of the Indian people.
On the global level, India is thelargest consumer of gold and accounts for more than 30% of the world’s gold market.
However, there is a catch, India does not produce enough gold to satisfy her demandand as a result the country must import gold to meet the demands of its domestic customersor consumers.
Gold is universally accepted and considereda safe investment even in the face of political and economic turmoil.
The metal is consideredsuch a solid investment that even traders involved in commodities trading invest ingold bullion.
These investments are determined by prevailing gold rates in the economy atthe time.
Though gold is a sound investment, it does not add much value to the Indian economy.
Currently, it is estimated that Indian households’ possess more than 20,000 tons of gold comparedto less than 600 tons held by the government.
To entice the Indian people to turn in someof their gold for interest bearing bonds, the government has come up with a gold monetizationscheme, however even this bright idea has met a lot of resistance from its citizens.
Most of the gold purchased by Indians is used as jewellery.
Though a few people buy goldwith investment in mind, most Indians still prefer the conventional way of holding thisprecious metal in its physical form.
This perception was evident when India initiallyintroduced gold ETF’s in 2007 and most citizens showed little enthusiasm over it.
With time,investment in gold ETF’s started gaining some momentum.
Silver on the other hand is used as a precious metal as well as for industrial purposes.
Globally, silver is primarily traded for industrial purposes, however in India; it is importedlargely for silverware and jewellery.
The country is among the 5 top consumers of silverin the world.
About 60 percent of silver imported in India is consumed in the rural areas whererural population view it as a solid savings commodityThough India consumes a lot of silver, it does not produce a significant amount of themetal to satisfy its needs.
This means that most of the silver, just like gold, has tobe imported.
With prices of silver having dropped by 18.
5%in 2015, the demand for the white metal has gone up.
More people, especially from ruralareas are changing from gold to silver amid the white metal’s declining rates.
Gold and silver are sold in the international market mostly in USD.
To meet the domesticdemand, importers need funds in dollars.
To get the required dollar amount needed to buythis precious metal, they have to sell Rupees to banks and buy dollars.
All things remaining constant, the transaction (selling Rupees to buy Dollars) tends to decreasethe value of Rupee in the foreign exchange market.
The decreased value of Rupee is notnecessarily bad as it helps exporters, on the flipside it makes imports priced in dollarsquite expensive.
The Indian economy relies more on importscompared to exports.
The greater the amount of imported commodities, the more the country’strade deficit (a gap between imports and exports) increases and ultimately raises inflation.
Gold and silver contributes to a significant portion of this gap because the volume ofthese imports are so high.
As explained earlier, gold and most of thesilver bought by the Indian people is not ploughed back into the economy as investment.
Rather than invest, Indians stockpile these precious metals as jewellery and silverware.
They end up holding piles of gold and silver as a hedge against bad times.
These assetsare used or sold as collateral with the local moneylender when the need for money arises.
Indians are highly determined to acquire gold and to a lesser extent, silver, by all means.
They are so keen on possessing these metals that they would rather sacrifice their country’seconomy and currency in the bargain.
By buying up billions of dollars’ worth of foreigngold and silver, Indians are sending their cash overseas and disrupting the balance ofmoney entering and leaving their country.
This has the effect of driving down the valueof the rupee.
For the Indian economy, the gold obsessionis worse than a poor investment.
Compared to purchasing bonds and stocks, parking moneyin gold slows down the country’s economic growth rather than stimulating it.
At thesame time, a growing trade deficit has been forcing the country to devalue its currencyat about 10% annually for the last 2 decades.
These plunging values scare people out ofrupees and foreign funds out of India.
This in turn translates into less investment andslower growth which weakens the rupee further.
It is a given fact that over the last decade,gold has given returns which no other asset class has been able to match, however thedemand for gold among Indians has always been price independent.
The effect of high priceshas been minimal on the volume of gold imported and low prices may increase the demand inthe coming days.
Here the important issue to note is that it is the economies of Europeand the US that play a major role in determining the price movements of gold.
By importinggold and silver, Indians are investing in the international markets and helping othereconomies to grow while slowing down India’s economy.
In spite of the factors stipulated, that may slow down India’s economy, Moody’s InvestorsService and International Monetary Fund (IMF) forecast that India is on course for a 7.
5%growth rate in 2016.
These institutions claim that the growth will be due to better investorconfidence, improved policy reforms and lower food prices.
Meanwhile, the jury is stillout on whether India’s love for gold and silver will slow down the country’s economy.
End of article.
So what are your thoughts about Kabir’scomments? Do you agree with him that the import of gold and silver is detrimental to India’seconomy? If so, or not, we would appreciate your opinion.
Our view is that the Indian people have for centuries worshipped the ownership of goldand to a lesser extent silver.
They see them as precious and of value throughout time.
We have already witnessed the tiny take up of Government schemes encouraging the useof paper gold and suspect that the Indian people’s attitude will remain little changed.
As we wish our subscribers to express their views freely and without fear, all that weask is that whether you agree or disagree with Kabir, that you express your opinionsin a constructive and non-offensive way.
We hope to hear your views and wish to thankKabir for his contribution.
We hope you have found this video interestingand informative and if so, please give it a thumb up and share it on twitter.
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Com/illuminatisilver Disclaimer: Illuminati Silver owners come from a backgroundof Banking, International Wealth Management and Economics.
Having now retired from theseworlds we are not qualified to give investment advice.
Therefore, this and other productionsmust not be deemed to be giving such advice and merely represent the personal views ofits owners.