Two, and perhaps three, recent developments on the gold front have set the stage for a 50% increase in the price of gold, and conceivably a doubling in the price of gold.
Demand for gold in India is expected to increase to 15 metric tons per month or a staggering 50% increase in demand. Last year the Reserve Bank of India took steps to curtail gold imports. These steps were not very well received by the Indian public and were certainly not effective. Now, India is allowed, without any curtailment, to purchase any quantity of gold from overseas sources – Dubai being their largest source of refined gold, as Dubai has the largest gold refinery operation in the region.
The expectation that the amount of gold imports will rise to 15 metric tons is considered to be on the conservative side and could easily project into a doubling of their present monthly gold imports.
From Citi, we have the following chart showing the dramatic rise in inflation, and as we know, gold is the safe haven in times of inflation and uncertainty.