ET: India goes bullish on gold, sees a dim dollar future: Forbes
WASHINGTON: India's purchase of $6.7 billion worth of gold from the International Monetary Fund (IMF) is a pointer that New Delhi sees a dim future for the dollar and is making a bullish call on the precious metal, according to a leading US business magazine.
"The move is already profitable as the Indians bought their gold at prices averaging around $1,000 an ounce. Gold closed at a record $1,085 an ounce Tuesday in New York," Robert Lenzner, National Editor of the Forbes magazine, noted in a commentary on Wednesday.
The big buy from India, bulking up its gold reserves by 55 per cent, follows months of huge gold accumulation by Chinese authorities as well as hedge fund operators like John Paulson and others amid growing anxiety about the viability of the dollar as the world's reserve currency, he noted.
Comparing history's most successful investor Warren Buffett's $34 billion bid for the rest of Burlington Northern Santa Fe, Lenzner said: "India, by comparison, is making a direct bullish call on gold, just as China, its major rival in Southeast Asia, did some months ago.
"India's purchase of $6.7 billion gold from the IMF at prices above $1,000 an ounce says plenty about some central banks' preference for gold over dollars," said Lenzner.
"Gold went from $100 in 1976 to $850 in 1980. This gold bull began at $250, suggesting a peak around $2,125 an ounce before this one's over.
"What's interesting is that the growth part of the world is the buyer," Forbes cites Frank Holmes, CEO of US Global Investors, a mutual company in San Antonio that specializes in natural resource stocks, as saying.
"This is another sign of the wealth shift from the developed toward the developing markets," says Holmes, noting the Indians' "cultural affinity" for gold.
"It's how they store their wealth, and they can wear it as jewellery."
"Could the Indian purchase be the catalyst that finally triggers a massive wave of speculation that drives gold to $1,200 or $1,300 an ounce, or even $2,300, where it would equal the former peak price when adjusted for inflation?" Lenzner wondered.
Reached by Forbes in Toronto, Canadian venture capitalist and mining entrepreneur Frank Giustra, who has been since 2002 recommending investors diversify out of dollars and hedge their portfolios with at least 15 per cent in gold, opined: "No one wants US dollars, and this is one way central banks can diversify out."
