Minyan Mailbag - Gold in India
Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.
In 1996 gold was above $400 and today gold is about $440.
In the same time, professional salaries in India have been up at least 500 %.
No bluffs, my Mechanical Engineer friends have 600% increases since 1995. My software engineer friends have 800% increases since 1995. Average personal income growth has been at least 400% due to inflation, influx of foreign cash and economical growth.
Now the engineering and small business figures are first hand figures from my friends and family. So probably I under-estimated them as opposed to the other way around..
You know the same is true for Chinese workers. Again when China grows 9% as opposed to 11% we call it a slowdown as opposed to a figure given by the U.S. of 4% and how trustworthy is that figure you know anyway...
So the point is that -
Regardless of USD rally (which is yet to be proven) the demand side is enough to put gold beyond $550. Add that to the decreasing mining output and you see the potential.
Now add the investment demand in the western world that is only now waking up...
I got an interesting comment from a friend from the stock legend "Jesse Livermore" book -
"In a bull market for anything make your decision and take your position
waiting out the walls of disbelief until optimism becomes as rampant as
was the disbelief. You then take your profit at a point of rational
satisfaction and never look back."
So we wait... Any corrections, bring them on. Happy to see them
now than before...
Another point about "Gold money" -
"When you buy gold, it is already paid to you. It is your property. When you hold paper it says - "I promise to pay the holder of this note xx dollars".
One is a promise to pay and other has already paid you.
In due time people will understand this difference. That is the difference between real money and paper....
Thanks for your observations of what is happening in India regarding income growth and also your observations about gold as money. It made me smile. I read your mail and turned to Lisa and said, "Hey, this guy gets it." You obviously have grasped the concepts that we have tried to illustrate over the past however long , and it gave me a big smile. Cheers.
I wonder what the increase in cost of living would equate to over the same period? How fast has wage growth oustripped inflation? I see that you mention that many of your "subjects" are engineers. This is very significant. Engineers are pretty crucial to a country on the cusp of the biggest economic boom in generations. Now that foreign capital flows are allowing massive infrastructure development and manufacturing muscle, there is no shortage of highly qualified and expertly trained professionals. And, I reckon, they will want their fair chunk of gold at the end of the week, just as we do. Except we accept paper whereas the Indian converts the paper to gold.
The "Livermore" quote is very appropriate for the commodity market at present. Those who are too cute could well miss the boat trying to "beat the bank" and outperform the sit and hold trade. I believe there is a mix of both strategies, passive versus tactical, that should achieve desired outcomes without risking being "out" when a big move comes. It varies from day to day, depending on a number of different inputs. I think one's gold/silver metal and equity exposure should be at maximum at current levels. Just fyi and not advice.
You are right about gold versus paper and I don't think it could be put any better, any time.
Do please keep us abreast of any news from or about India and what's happening there, especially if you know anyone in the gold trade!
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