The majority of people, including the more educated investors, are totally unaware of the fact that there has been a strong, clear, and consistent seasonal demand for gold over the last 30 years during the second half of each year, and in most cases prices have followed suit. The question is posed to me all the time, "Why?", and the reality is that that there are a multitude of reasons for that some of which are fundamental, while others are more of a technical nature; but none the less, prices are dramatically rising and that trend has been even more distinct and profound during this current 'bull market' over the last decade.
Who is the traditional gold buyer? We need to recognize who they are and to do so we need to understand the tangible and fundamental reasons for buying gold. In India, first and foremost we have found the largest gold buyers in the world, making up over 800 tons per year, and the vast majority of their purchases are mainly in jewelry. They have a long tradition of buying gold in that nation, as it has always been a way of preserving wealth in their culture, and most of their purchases come from their rural areas comprising approximately 65% of the demand. The Indian Monsoon season also plays a critical role in determining the amount of the gold demand for the year. On the average every year around May, the Indian population begins planting their crops just before the Monsoon season which normally occurs during the summer months. Later in September is when the harvesting of the crops begins and if the Monsoon season is a successful one, the gold demand reaches great heights. This year, according to India's weather office predictions, the country should benefit from a normal rainfall in the June-September monsoon season, which is of course good news for Indian farmers as it raises hopes for a good farming season usually signifying a fine year for Indiaís gold demand.
In India there are several different periods when gold buying peaks and prices usually soar. These favorable days, usually religiously oriented, are thought to be constructive for occasions such as the "Marriage Season" which commences in October and lasts through to the following May, and during this period gold is purchased in high capacity, partly to enable the bride to come to her groom covered in gold and bearing it as her "dowry". Another such point where it is thought advantageous to buy quantities of gold is during the "Festival of Lights" in the month of October. In one more of this series of Indian gold uses we find distinct spikes in the months of January and September, because at that time manufacturers typically refill inventories to realize the demands of two Indian wedding seasons, including the festival of Diwali, starting in the month of November and ending in December, and the second which begins in late March and continues through early May.
According to the World Gold Council, 10 million marriages take place every year in India, and the demand for those occasions account for a substantial proportion of the overall global jewelry purchases. According to the council, the Indian gold jewelry sector accounts for an astounding 75% of the total domestic gold demand in 2009. Making things more exciting for the gold market is that Indian consumers have adjusted their price expectations upwards; "Given the rebound in gold demand and higher price expectations WGC expects a positive outlook for the Indian gold market for 2010." It has readily become apparent that not only have Indian consumers been heavy buyers of gold in jewelry form, but in recent times they are steadily increasing their demand of gold as an investment vehicle. The "WGC believes that Indian investors may continue to move into gold as an insurance policy to protect their wealth from the aftermath of the global financial crisis since there are few assets that have the ability to hold their value during extreme conditions."
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