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Tuesday, April 17, 2012

The Big Rally in Gold is Getting Closer and Closer

The Hindu festival of Akshaya Tritivai is coming up this month and this is of interest for gold investors. The holiday, which falls on April 24th, is a day when Indians go on a major gold buying binge. It is one of the most auspicious occasions to buy gold, the ultimate symbol of wealth and prosperity. The timing couldn’t be better for the ending last week of the 20-day strike by India’s jewelers and gold importers who protested new government taxes on bullion. Moreover, the wedding season has already started in some parts of India and gold is an integral part of most Indian weddings. It is expected that in April and May imports will be around a 100 metric tons to India, the world’s largest consumer of gold. The nationwide strike is estimated to have cost the industry at least $3.91 billion.

According to an annual report released Wednesday by metals consultancy GFMS, gold’s speculative investors may have been shaken by gold’s volatile ride last year, but the physical market—particularly in China—remained faithful to bullion and the trend is expected to continue in 2012.

Gold bar demand and hoarding from China alone rose 40% in year- on-year in 2011 to a new record of 250 tons, according to GFMS. And this trend is likely to continue.

Demand for physical gold in the form of coins and bars grew in 2011, while Chinese appetite for gold jewelry expanded to record levels. This contrasted with a 10% drop in overall world gold investment by tonnage, amid heavy redemptions in the over-the-counter and gold futures markets as investors cashed in their gold positions amid heavy losses in other financial markets.

While investment demand dipped, 2011 was a “bumper year for physical investment,” according to a GFMS metals analyst. “Gold was clearly dependent on emerging markets’ economic strength as China’s jewelry demand grew to a record level, while India’s fell by less than 3%.”

Physical gold bar investment surged 37% last year to a new record of 1,209 tons, according to GFMS. This was driven by strong demand for physical gold as a store of value in China and India as well as “safe haven” interest from western investors, the report said.

Global gold coin fabrication rose 15.2% to 245.5, spurred mainly by strong demand in Turkey and China, said GFMS. Rising concern over inflation and the rapid hike in disposable incomes in places like China is also driving demand for physical gold, said GFMS.

Although the Hindu festival of Akshaya Tritivai is still 7 days away, let’s see if it will indeed be auspicious to buy gold during this period. Let’s turn to today’s technical part. We will start with analysis of the US Dollar Index (charts courtesy by http://stockcharts.com.)

         
Our first chart today is the very long-term USD Index chart. Since virtually nothing changed last week, we have decided to quote from last week’s commentary:read full article here

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