Another Reason Gold Will Go Lower
Indian Brides Aren’t Going To Get As Much Gold This Year!
Gold is clearly in a bear market. But how can that be when inflation is skyrocketing and there are more global tensions than at any time in 10 years. Where is the safe haven buying? Why isn’t gold going higher?
One of the key reasons that gold is not going higher is that demand is being crushed because:
• High real interest rates
• Strong dollar
• Weak Indian rupee
In this report, I want to focus on the last factor.
Few people realize that India accounts for 50% of the yearly demand for gold! And nearly all of that demand is gold for brides!
Gold usually has a seasonal rally in August as Indian merchants buy gold to fabricate into jewelry that is sold during the wedding season which is in the fall in India. You can see in the chart that we got a rally in the first half of August but it failed in the latter half.
One key reason can be seen by the orange line on the chart which is the price of the Indian rupee. An upward sloping line means the dollar is strong against the rupee.
Well, a declining value of the rupee means that gold is getting more expensive in rupee terms which chokes off demand for gold for brides. The brides will smaller and/or less jewelry for their wedding!
The Indian rupee is in a major bear market due to things like high inflation. I look for the rupee to drop another 5-10% in the coming 6 months. That will keep a cap on gold prices.