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India, Indonesia, China and Wider Asia Buy Physical Gold and Silver on Dip as Stagflation Threatens

Posted By admin On May 11, 2011 @ 7:52 am In Money Watch | Comments Disabled

Gold Core [1]
Wednesday, May 11, 2011

Gold and silver have extended their recovery and may be headed for the fourth day of gains due to the continuing European sovereign debt crisis, Chinese inflation (+5.3%) and the real risk that rising oil and commodity prices are leading to an international inflation spiral and stagflation.

India, Indonesia, China and Wider Asia Buy Physical Gold and Silver on Dip as Stagflation Threatens  goldcore bloomberg chart1 11 05 11 small [2]
Cross Currency Rates

German inflation data this morning was worse than expected, jumping to 2.7% from 2.3% due to surging energy costs, and in spite of the recent strength in the euro. This has led to the euro falling against all currencies and especially against gold.

In the US, gasoline prices are continuing to rise with US petrol prices looking set to hit $4.00 a gallon. The man in the street is feeling inflation in his pocket contrary to reassurances by Ben Bernanke and the Federal Reserve.

India, Indonesia, China and Wider Asia Buy Physical Gold and Silver on Dip as Stagflation Threatens  goldcore bloomberg chart2 11 05 11 small [3]
Generic Gasoline Future – 5 Year (Weekly)

The precious metals are likely to be supported later today when US trade deficit data is expected to be poor with still high oil prices leading to a very large expected deficit of $47.7 billion. This should see the dollar come under pressure and support gold.

The Bank of England inflation report today is expected to point to higher inflation but still no interest rate rise due to declining economic growth.

India, Indonesia, China and Wider Asia Buy Physical Gold and Silver on Dip as Stagflation Threatens  goldcore bloomberg chart3 11 05 11 small [4]
UK CPI EU Harmonized YoY – 1989 to Today

Stagflation or low economic growth, high unemployment and rising inflation is a clear and present danger to the UK, EU and US economies and other economies internationally.

This is especially the case in the UK where house prices have begun to fall again and may be set for sharp falls. Internationally, we are seeing significant debt deflation where the value of goods and assets bought with debt are falling (cars, property etc) while the value of finite, essential goods such as food and energy are rising.

Safe haven and inflation hedging diversification into gold is likely to continue as inflation is deepening and there is a distinct whiff of stagflation in the air.

Ultra loose monetary policies and leaving interest rates close to zero percent will lead to further inflation and currency debasement. In order to curb stagflation there will need to be a return to monetary and fiscal discipline and positive real interest rates as was done by Paul Volker in the 1970s.

It is too early to tell whether the recent sell off is over and a further correction is possible however global macroeconomic conditions suggest that gold and silver bull markets are very much intact.

This is especially the case due to continuing Asian demand with gold again being bought on all dips in China, India and the rest of Asia.

Bloomberg reports that Indian demand remains robust according to UBS sales figures. Reuters report that the selloff in gold and silver has seen physical buying of both gold and silver in Asia where dealers report that there was physical buying below $1,500/oz from India, Indonesia and China.

A Hong Kong dealer said that there was “not much scrap selling, as people are still bullish on gold” (see news).


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URLs in this post:

[1] Gold Core: http://www.goldcore.com/goldcore_blog/india-indonesia-china-and-wider-asia-buy-physical-gold-and-silver-dip-stagflation-thre

[2] Image: http://www.goldcore.com/images/mu/goldcore_bloomberg_chart1_11-05-11.PNG

[3] Image: http://www.goldcore.com/images/mu/goldcore_bloomberg_chart2_11-05-11.PNG

[4] Image: http://www.goldcore.com/images/mu/goldcore_bloomberg_chart3_11-05-11.PNG

[5] Stagflation Threatens Western Economies – Gold A Bubble, To Correct Or Go Parabolic As Per 1970’s?: http://www.prisonplanet.com/stagflation-threatens-western-economies-%e2%80%93-gold-a-bubble-to-correct-or-go-parabolic-as-per-1970%e2%80%99s.html

[6] Gold:Silver Ratio Falls as Silver Rises: http://www.prisonplanet.com/goldsilver-ratio-falls-as-silver-rises.html

[7] UNPRECEDENTED Shortages Of Ammo, Physical Gold And Physical Silver: http://www.prisonplanet.com/unprecedented-shortages-of-ammo-physical-gold-and-physical-silver.html

[8] Record High Demand For Physical Gold Threatens To Break The Back Of The Paper Gold Market: http://www.prisonplanet.com/record-high-demand-for-physical-gold-threatens-to-break-the-back-of-the-paper-gold-market.html

[9] 10 Signs The Takedown Of Paper Gold Has Unleashed An Unprecedented Global Run On Physical Gold And Silver: http://www.prisonplanet.com/10-signs-the-takedown-of-paper-gold-has-unleashed-an-unprecedented-global-run-on-physical-gold-and-silver.html

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