India’s Ban on Cash Could Send Gold Prices Soaring
Gold prices could surge going into 2017. Don’t let the recent decline in the precious metal discourage you. In the long term, gold is setting up to provide big gains.
One of the biggest factors gold bulls should be paying attention to these days is what’s happening in India. It could impact gold prices immensely.
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You see, not too long ago, out of the blue, the Indian government banned a few of its most-used currency notes—the 500-rupee bill and the 1000-rupee bill.
Why would the government suddenly do this? We are told that the government of India wants to fight corruption. The best way to do this would be to get people to deposit their money into bank accounts. Then, eventually, banks will reintroduce these bills to the market.
Before going into any details, you must understand that India is one of the most cash-reliant countries in the world. A large number of workers get paid in cash, and consumers use cash to buy goods and services. Also, a large portion of the population doesn’t even have bank accounts.
To deposit your cash in a bank account, or get different bills, you have to wait in lines. As a matter of fact, the lineups are rigorous. Consider this: a 75-year old man died waiting in line outside a bank in Secunderabad, a city near Hyderabad, in Andhra Pradesh. (Source: “A 75-Year-Old Man Dies In Queue As India Battles Cash Chaos,” NDTV, November 15, 2016.)
At the very core, Indian consumers are suddenly finding their cash could be worthless.
Gold Prices and India
Here’s what you need to know. India is one of the biggest consumers of gold in the world. Indian consumers exchange gold as gifts at weddings and for other occasions. One of the biggest reasons for this is because gold is considered wealth and something that could be used in times of hardships.
With this in mind, you have to question: could demand for gold in India surge as consumers and investors find it difficult to convert their currency?
Over the past few years, the government of India has imposed duties on imports of gold. This catered demand significantly.
With a cash ban, there was a lot of noise that suggested India would also restrict gold holding. Just recently, we heard this was ruled out by the government. (Source: “Demonetisation: No proposal to restrict gold holding by individuals,” The Times Of India, November 25, 2016.)
Looking at all this, it wouldn’t be shocking to see gold demand in India soar, and in turn, this could impact gold prices significantly.
Gold Prices Outlook: Bullish, if You Own It
Dear readers, understand that what happened in India is just an example of where gold comes out as a winner.
As it stands, there’s a lot of debate around the world about bringing in digital currency and abolishing all cash. As all of this continues, gold prices will soar. Gold holds value, when fiat currency could become worthless in an instance, and digital currency could be stolen or maybe copied.
I remain bullish on gold prices. The yellow precious metal is selling at a severe discount, and all the stars are lining up perfectly for major gains in gold prices going forward.
