Gold - The Global Weekly Perspective

By: Julian D. W. Phillips | Thu, Mar 10, 2005
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HIGHLIGHTS from "Global Watch - The Gold Forecaster" Pages:
- Market Action / Short-term forecasts for all MAIN markets!
- Hedge funds - Hedging results - Pure Hedging! /
- A deep look into the Indian Gold Market / O.P.E.C. does nothing! /
- The prospects for the U.S. $ / Mining survivors are moving.
- Summary: The present Gold Price Drivers.
- Technical Analysis of the Gold Price: Long/Short term.
- International gold markets across the Globe!
- Silver / Platinum
- SHARES/INDEX - DRD Gold / Shares: HUI Index /NEM / AEM/ NG /VGZ / MMRSF / SSRI / PDG / HMY

That was the week that was.

Why the Strike over the 2% duty in India?
The government should not be surprised at strike over the 2% duty they have proposed putting on Hallmarked [and any other markings, including in the packaging, according to Customs] jewellery. It's like sticking a finger into the eyeball of the industry!

But what surprises us is that the government has a full understanding of the business and has been liberalising it over the last few years, as well as promoting it on the international front, so why this heavy hand? They have, according to Daman Prakash, a full and dynamic democracy and intend to meet the aspirations of the people, where it can.

In India, gold is not simply gold. Apart from its religious significance it permits the free flow of the country's wealth, with or without the approval control of government and tax authorities. A key part of that scene is the presence of "Black Money". Like the French and so many other nations, tax avoidance and even tax evasion is a national sport as well as a delight.

The typical businessman who earns U.S.$100,000 through his business should pay $30,000 in tax, but it is not strange for only $30,000 to be declared as taxable income, suffering $10,000 [you've got to pay something haven't you?] tax. The undeclared balance of $70,000 is received in cash or through undervaluing the sales and stock, overvaluing costs, expenses and even manufacturing expenses creatively. The cash is always invested in Land or Gold.

The gold is hoarded as jewellery and is safer than paper currency, which can be destroyed by fire, or flood and requires more space. A huge amount of the estimated 15,000+ tonnes of gold hoarded in India is in hidden chambers, etc. This is a way of life that is unlikely to change. This is why it is so hard to get accurate figures on gold from India.

This attitude is supported by the agricultural sector, whose income is tax free, but income on that income is not. As a result their cash then moves into circulation, without making a footprint in any books.

In India, believe it or not, most lending and borrowing is outside the banking system and by word of mouth. It speaks volumes for the high level of honesty in that nation. Such levels of honesty are a thing of the past in the 'developed' world? And what is more is, it is this "Black" money that makes up this 'off-balance sheet banking'. It is this that finds its way into Real Estate of Gold. We have often wondered why the banking system is not more developed and more of an integral part of Indian life. In the developed countries both government and banks have a vice-like grip on our money and us, which we seem to accept blithely. And as technology has advanced, the control we have over our money and taxes has been steadily lessened in our hands.

Not so in India, for whilst the banking system is modern, it is under the scrutiny of the Income tax authorities. "Black Money" does not go into a bank account! It goes into Gold!

With gold now to fall under the Excise net, every purchase of gold will need to be scrutinised by officers and require strict accounting. So if the rules are as the Taxman wants to interpret them [He is even deeming unmarked gold in branded packaging as marked] the "Black Money" will disappear from the market, or any form of marking gold will disappear, thus costing thousands of jobs in a the gold sector, if the interpretation of the new tax is intended to be so rigorously applied.

However, with corruption so rampant from the top to the bottom of Indian society, from Politicians and Bureaucrats [they too receive money in CASH for their favors which falls into the "Black Money" category in India. That is again is invested in Land/Gold] it would seem unlikely that such a complete definition would be finally imposed.

The strike in Mumbai of Jewellers and traders has been declared an indefinite strike, in protest against the Finance Minister's proposal of imposing the 2% excise duty on branded jewellery. The strike has affected a very large number of employees, who work for daily pay.

On Friday, Industry representatives met the Indian Finance Minister to clarify the ambiguity prevailing around the definition of branded jewellery. With over 90% of gold jewellery in India manufactured through a fragmented unorganised industry, by artisans spread across the country, such a tax could cause havoc.

After the meeting, the Finance clarified matters on the definition of Branded jewellery, which released 90% of the trade from the excise tax net, the tax officials went back to their kennels and the strike was withdrawn on Saturday.

O.P.E.C. is doing nothing!
The consensus is that oil price production will not be altered in this market, where oil prices are holding just below their recent peaks. The main reason, let's be frank about it, is market is not complaining loudly. Their acceptance of these prices is coming.

All are aware that any disruption to supply would require an increase in supply, so if there remains an effective amount in reserve, its price impact will be greater than if it is a small amount.

The concept that demand is not likely to fall by any significant quantity is also being accepted. We expect that prices of $60 to $80 may well be seen this year or at the latest next year in the first half of 2006.

The funds have begun moving into position!

We published an article on "The French have stopped selling Gold", which we will happily send you [free] if you send us your e-mail address [to]. It is the second article on a series on the prospects for Capital Controls in the future.

The London Gold Fix
8th March a.m. $434.85   €328.610
8th March p.m. $437.25   €328.389

International Gold Prices in their Currencies:
We would ask our readers to note that the globe has seen a separation of the nations into two camps.

1. Those that adjust interest rates due to internal factors alone, whilst ignoring the exchange rate impact.
2. Those who are concerned enough about foreign exchange rates to interfere in the market directly and temper interest rate levels in the light of their impact on foreign exchange rates.

This separation will be featured in future issues, of "Global Watch - The Gold Forecaster" and "Gold - The Weekly Global Perspective" with reference to the Gold markets!

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Julian  D. W. Phillips

Author: Julian D. W. Phillips

Julian D. W. Phillips
Gold Forecaster

Julian D. W. Phillips

"Global Watch: The Gold Forecaster" covers the global gold market. It specializes in Central Bank Sales and details, the Indian Bullion market [supported by a leading Indian Bullion professional], the South African markets [+ Gold shares shares] plus the currencies of gold producers [ Euro, U.S. $, Yen, C$, A$, and the South African Rand]. Its aim is to synthesise all the influential gold price factors across the globe, so as to truly understand the global reasons behind the gold price.

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