By Geena Paul
MUMBAI (Commodity Online): With the New Year is just into its second week, bullion analysts are on high hopes that the metal will perform better in 2010 as the world is yet to come out of the recession blues.
In a way analysts are all banking on the bad news so that Gold can make a killing. So, the doomsayers are always backing gold as a safe haven and urging people to invets in the yellow metal.
In fact, majority of the bullion analysts are hoping that the world will see more tragedies and the looming doom will help gold prices to soar.
If you think away from this traditional way, there are some positive sides which will help gold prices to soar.
REASON NO. 1: China, the world’s fastest growing economy and the largest population, has witnessed a big surge in gold jewellery buyers not because of the recession blues but because of the reason that they have more disposable incomes now to buy luxuries. So, if a huge population in the world is earning more as their country is making rapid strides in development, nobody can stop them. Because, China’s time has come.
And, they are showing it. In 2009, China has pipped India to the post as far as gold consumption is concerned. When India’s gold imports slumped hugely in 2009, leaving the country in second position as far as gold consumption is concerned, the jewellery sales were also hit badly. In fact, people, especially the rural folk who mainly depend on their crops to buy luxuries, were reluctant to buy gold at exorbitant rates.
But, China witnessed just opposite trend. Buyers flocked to jewellery shops and bought gold and Platinum ornaments like never before, pushing up sales across the country. And, if a nation with more than 1 billion population is on a gold buying spree then no other country in the world can match it. So, first of all, it is the positive news in China which will ensure better Gold prices in 2010.
China is already the largest gold producer in the world with an output of around 282.504 tons in the first 11 months of 2009. That figure represents a 14.6 per cent increase over the same period in 2008. Miners expanded output last year after bullion prices soared to record highs, with production in November alone reaching 27.952 tons, said the ministry.
Bullion gained more than 50 percent in 2009 from $801 an ounce in January to $1,226 an ounce in December as a weak dollar drove demand for precious metals as alternative assets.
The estimated demand for gold in the country was 450 tons in 2009, up 13.8 percent from 395.6 tons in 2008. China overtook South Africa as the world’s largest gold producer in 2007.
REASON NO 2: India, after witnessing a slump due to the recession effect, is on a song now. The country expects its GDP to grow above 7 per cent, as against a previous forecast of just above 6 per cent, and almost all sectors are looking up. Job fears are a thing of the past in India and in the first three months of 2010 Indian firms are on a hiring spree.
This has brought huge confidence back in the market and people have started spending money on luxuries. So gold will definitely be in their shopping list in the days to come. Moreover, once Indians realise that the gold prices will not come down as they expected, they will start buying the yellow metal because Indians give lot of importance to gold in their lives.
And, if both the hugely populated India and China start buying gold in a big way, nobody will be able to stop the gold bull run in the coming days. The two nations are the fastest growing countries in the world now.
