Gold Forecaster
- Global Watch
Indian Gold Demand/Oil
Crisis
Julian D.W.
Phillips
April 18, 2006
Excerpts
from "Gold Forecaster - Global Watch."
Indian Demand
The Indian economy itself continues to enjoy growing wealth.
A holding back of investment into gold has been because of the
price. The enrichment of all Indians will over the longer term,
be to the benefit of the gold market. The acquisition of wealth
will lead to greater consumer goods being purchased, but gold
is the destination of savings and investments away from the visible
economy too, so gold will remain a major feature of Indian's
lives.
As the wedding season kicked
off on the 14th April, we expect the break through the Rs. 27,000
to spur buying, as the realisation that the high prices are here
to stay. Yes, there is dishoarding and it is growing. Indian
demand has reached 1,000 tonnes a year in the past of which 850
tonnes was imported previously. Imports this year are close to
zero and even now wedding purchases of gold are down 30 to 50%
so far, but that leas 50 - 70% of normal gold buying continuing.
This could well lead to Indian imports even below 400 tonnes
this year if this continues, but this is clearly not slowing
the price rise of gold.
Those staying out of the market
have and will miss out on these rises unless they change their
stance. It appears that small retailers and their clients will
adjust their view, so we do expect them to return to the market
once they realise that prices are not going to come down.
How can we be so certain? A
family Elder in India is cautious in the face of the price rises
in the market. Imagine him going home and telling his wife and
daughter that because the gold price has risen 20 or 30% he is
going to break the age-old tradition of buying gold for the daughter
on her wedding day to provide financial security for the couple.
He would risk a lynching for sure. No, we expect that after six
months of waiting, he will go to the market and buy gold, albeit
in smaller volumes. There are signs that this is now happening.
One dealer said the current
prices were sustainable. "People now have a little more
confidence in high prices," said one dealer in Mumbai. Consumers
are used to high prices it seems?
The Oil Crisis
Perhaps this title
is an understatement, because we are facing far more than simply
an oil crisis. The difference between the price of Brent Crude
and West Texas is disappearing as supplies are rapidly being
overtaken by demand.
The capacity cushion in the
entire oil industry was at 1.7 million barrels, 1.5 million of
which sits with OPEC. We believe this has dropped to perhaps
below 1 million barrels per day by now and dropping fast. The
questions we have to ask now are:
1. The interruption in supplies
from the Nigerian Delta region are continuing, that's up to 600,000
barrels down on global supplies. What will happen if supplies
from Nigeria, Iran or places like Venezuela are interrupted?
2. Chad is threatening to hold back 160,000 barrels a day.
3. What if suppliers turn to exclusive contracts with individual
nations like China to the detriment of other buyers?
4. To what extent will individual nations go to, to secure their
own supplies of oil?
5. Just how far will the U.S. go to, to ensure continued supplies
from the Middle East?
Clearly we are on the brink
of a global oil shortage.
Iran
A strike against Iran is close to a certainty now. Few doubt
this it seems. But we have to ask why? Yes, the nuclear enrichment
programme is a focal point, but far more is at stake here. And
we are not talking about political factors or nuclear threats.
We are talking of the consequences of these actions. We are not
here to moralise, to justify or support or oppose any of these
actions. We are here to help our Subscribers assess the consequences
and their effect on the gold market primarily, through the events
that take place in this globe of ours.
One of the immediate consequences
is rising levels of tension, as war raises its ugly head. Should
there be a strike against Iran's nuclear facilities, Iran is
unable to react, effectively, militarily. Their 'revenge' will
probably only be seen in its control of its own oil supplies.
It has always had the option of diverting all its production
to the East, to attempt to keep the oil price rising. But such
ploys will lead to three figure oil prices and elevated levels
of global tension.
On top of this the possibility
of sectarian violence lies ready to persuade the Middle East
in its entirety, to expand sectarian violence, causing supply
ruptures thereby eliminating any remaining surpluses.
April 17, 2006
-Julian
D.W. Phillips
email: gold-authenticmoney@iafrica.com
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