We might be the only country in the world which treats the import of gold as the US treats the import of cocaine from Columbia. I understand, we need to keep our current account deficit down and get a ratings upgrade, but I believe the whole artificially window dressing our current account numbers should go. Gold prices apart from the fact that India has suddenly started consuming less gold (or not) have plummeted over the last couple of weeks which has many equity bulls point towards how pathetic the asset class is and why everyone should shift towards equities. Here is why I am still Bullish on Gold:
- The Fed Balance Sheet: I know the Fed has brought to an end the quantitative easing program but what’s left now is a balance sheet the size of various economies around the globe. Whenever, the Fed plans on deleveraging this balance sheet (read: NEVER), the world would enter a phase of turbulence and gold would be the only asset class providing us with a hedge.
- Europe: The eurozone economies are like a patient on life-support which in my opinion are an inch closer to death. Many believe that Germany has had enough of the ECB trying to pull rabbits out of numerous hats and might actually start mulling over exiting the Eurozone and going back to the Deutsche-mark. If the scenario does play out we all know gold is going to rally
- Geopolitical Risk: Russia, has been long given the wrong side of the stick over the past year right from the time it tried invading Ukraine. I don’t think Russia under Vladimir Putin would back down and if the world keep on putting sanctions on the country, it would retaliate, not by war but by signing treaties with other countries (Read: China) to do away with the dollar as the currency of choice for trade. Gold gains.
- India: When was the last time we went to an Indian marriage and people did not wear gold? That is never gonna stop. We, Indians don’t just look at gold as an investment, we “consume” the yellow metal and given our demography, more marriages in the future would mean more gold consumption.
Investment Disclaimer: Our Firm AJB Ventures, has been very bullish on gold and have asked our clients to be buying gold in a systematic manner every month. We have a 4 year price target of gold at $2500.
