Tuesday, August 28, 2012

Long on Gold - CLSA.

We have been bullish on Gold and Silver from quite some time. 

CLSA confirms our understanding. Happy Investing!!

What is a fairly good indicator that the bull market in gold is yet to run its course? Look no further than the purchases of gold by central banks across the world.

Here is what CLSA strategist Christopher Wood has to say in the latest issue of his newsletter 'GREED and fear':

"There is the continuing evidence of the growing number of central banks announcing that they are buying more bullion. Korea, Russia, Ukraine or Mexico are all recent examples of this trend. Thus, the Russian central bank reported this week that its gold holdings increased to 30.1 mn ounces as of 1 August, up from 29.5 mn ounces on 1 July, accounting for 9.5% of its total international reserves. The World Gold Council reported that central banks` gold reserves increased by 157.5 tonnes in 2Q12, the largest quarterly net buying since the official sector became a net buyer in 2Q09. The conclusion for investors is stupefyingly simple. Stay long gold."

According to Wood, while the official data on gold purchases by Indians shows a decline, that may necessarily not be the case:

"India is also still on course to purchase another 700 tonnes compared with 933 tonnes last year again based on World Gold Council data. If the official figure for India is falling, GREED & fear hears that the reality is that Indian people are now buying gold with cash to avoid the higher duties imposed in March when the gold import duty was doubled to 4%. As a result, these cash purchases will not be recorded in the official data."

One more reason why gold still retains its lure despite the high price:

"It is also the case that the rupee`s recent weakness means that the gold price has been rising in rupee terms enhancing its appeal to Indians as a store of value."

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