Gurus Go for the Gold

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As an Asset Bubble, Gold May Burst After Reaching $2,000

by Kunal Bose

Investment guru Marc Faber is a zealot when it comes to promoting the cause of gold. The publisher of the celebrated newsletter Gloom, Boom and Doom is at the same time rubbishing the dollar and currencies of countries which go on printing notes in attempts to stimulate their economies. The contrarian investor often referred to as Doctor Doom has got another equally controversial investor Jim Rogers to keep company in celebration of gold at the expense of currencies.

So is not Faber happy that his favourite precious metal gold has once again moved beyond the $1,200 an ounce resistance level after moving sideways for a while? What should be a cause of particular delight for Faber and Rogers is that their unbounded enthusiasm to make the public, going beyond the high networth individuals to see the virtues of regularly adding gold to the investment portfolios when the developed economies look wobbly is seeing its denouement.

We in India continue to buy gold mostly in the form of jewellery. Therefore, the Indian consumer demand for gold surging hugely in the first quarter of this year to 193.5 tonnes could not have drawn inspiration from exhortations of Faber and Rogers. The craving for gold jewellery here is so strong that the Indian womenfolk just needed some time to get reconciled to high prices of the precious metal before resuming buying and with some abandon. The World Gold Council says gold jewellery demand in non-Western countries will continue to recover from the first quarter level of 470 tonnes.

For whatever reasons, while India remains the largest consumer of gold ahead of China, our citizens unlike the Chinese are yet to start any meaningful diversion of their assets in the bullion to protect themselves against inflation.

The world is seeing since 2002 when People’s Bank of China shed its monopoly over gold coinciding with the commissioning of Shanghai Gold Exchange, Beijing is encouraging the people to acquire gold in physical form and also as investment products. Consequently, in the three years since 2007, the Chinese demand for investment gold has more than quadrupled.

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© 2010 Business Standard

Dr. Marc Faber [send him mail] lives in Chiangmai, Thailand and is the author of Tomorrow’s Gold.

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