You are here
Toronto Globe and Mail features GATA Chairman Bill Murphy
By Gautam Chikermane
Indian Express, Mumbai
Friday, December 16, 2005
http://iecolumnists.expressindia.com/full_column.php?
content_id=84042
I plead guilty.
For denouncing gold as an asset class.
For castigating millions of Indian investors who invested their
savings in it.
For being insensitive to the ground realities of this "obsession."
For the dozens of times I've publicly condemned it during the past
decade.
And, most importantly, for not being able to empathise with the
large mass of India that lives 50 km beyond metros, cities, and
large towns.
But the reason is not because of price movements that can prove and
in this case have proved analysts who pray at the altar of financial
assets wrong.
True, over the past 12 months, gold has risen by 25 percent,
breaching the 8,000-rupee mark, to close at Rs 7,540 yesterday.
True, it is only the past three years has seen the beginning of this
stratospheric journey.
True, between July 1991 and March 2002, the price had been
fluctuating in the Rs 4,000 to 5,000 band -- except, of course, the
small 14-month period ending exactly nine years ago, in December
1996. Also true, this spurt in gold prices has broken all previous
trends and converted one of the most striking and most repeated past
truth into a present myth.
Truth was, gold has a low or negative correlation with most other
asset classes like stocks and is inversely proportional to the US
dollar. The past 12 months have seen the Sensex rise 40 percent to
close at 9,170 yesterday. The rise over the past three years has
been 174 percent, or about 40 percent per annum. Gold over the same
period has risen by almost 40 percent or 11.7 per cent per annum.
The Sensex has grown by 18.5 percent per annum over the past five
years, gold by 11.6 per cent.
One probable explanation is that gold is being driven by a global
rethink on asset allocation, while Indian equities are experiencing
a country re-rating. The dollar too has been rising -- against both
the euro and the yen.
Let's leave global trends alone and move toward a more mundane and
touchable reality here.
The villager in Nu, about 100 km from Delhi, is unconcerned with
anything beyond his crop and capital. As and when he generates a
surplus, if it is large enough, he buys land; if it is smaller,
gold.
Now there are more than 150,000 post offices, four out of every five
catering exclusively to rural areas, according to the Department of
Posts. They are supposed to offer small saving schemes like PPF to
small savers. As we all know, these are instruments that offer
artificially high returns that are guaranteed by the government.
And still farmers, farm workers, petty traders, and the whole
village economy buy gold, not PPF.
The reason? Access. Try opening a PPF account there and you face a
process, a bureaucracy, a system that forces you to hit gold. Try
opening a bank account with a public sector bank in the closest town
and there are no cheque books. Simple matters that we take for
granted in cities turn into full-fledged projects. Are these
instruments, these banks (for now, we're not even talking about
mutual funds) the exclusive preserve of the educated, wealthy, urban
citizens?
Surely there is a logic why people buy small amounts of gold for
their daughters in these villages -- gold, for them, is a means of
last resort. But here lies the surprise: Most of rural India does
not, as analysts imagine, buy gold jewellery but gold coins. Gold
jewellery, says an analyst, is bought by urban investors. The rural
population doesn't buy jewellery because there is a strong emotional
connection with it. A mundane coin is a mundane coin. Sell one
today, buy one tomorrow -- no guilt, no sentiment.
The three-part logic is crystal clear.
One, the front-end of financial intermediaries doesn't offer trust
or convenience.
Two, the processes are so cumbersome that corruption is inevitable.
In the heart of Delhi I have seen an old woman grovel before a post
office clerk and finally pay a bribe to get her own money back even
as I was told to deploy my small investment through an agent, so I
could get part of his commission back.
Three, higher returns, therefore, don't matter.
So it's gold. With all its accompanying statistics -- Indian public
holding about 7-8 percent (more than 15,000 tonnes) of global
stocks, buying Rs 40,000 crore (19 percent of global consumption) of
gold every year and so on. The recent change in guidelines that will
pave the way for mutual funds to invest in gold is thrice removed
from traditional gold buyers -- lack of access, trust,
understanding. For this to change, lots more needs to change.
Guilty, as charged.
----------------------------------------------------
To subscribe to GATA's dispatches, send an e-mail to:
gata-subscribe@yahoogroups.com
To unsubscribe, send an e-mail to:
gata-unsubscribe@yahoogroups.com
----------------------------------------------------
RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS
Free sites:
http://www.cbs.marketwatch.com
http://www.usagold.com/amk/usagoldmarketupdate.html
http://www.capitalupdates.com/
http://www.silver-investor.com
http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kereport.com
(Korelin Business Report -- audio)
http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)
http://www.resourceinvestor.com
http://www.goldpennystocks.com/
Subscription sites:
http://www.lemetropolecafe.com/
http://www.interventionalanalysis.com
http://www.investmentindicators.com/
Eagle Ranch discussion site:
http://os2eagle.net/checksum.htm
Ted Butler silver commentary archive:
http://www.investmentrarities.com/
----------------------------------------------------
COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS
Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112
888-413-4653
http://www.blanchardonline.com
Centennial Precious Metals
Box 460009
Denver, Colorado 80246-0009
1-800-869-5115
http://www.USAGOLD.com
Michael Kosares, Proprietor
cpm@usagold.com
Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
http://www.ColoradoGold.com
Don Stott, Proprietor
1-888-786-8822
Gold@gwe.net
El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
http://www.eldoradogold.net
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203
harvey@eldoradogold.net
Gold & Silver Investments Ltd.
Mespil House
37 Adelaide Rd
Dublin 2
Ireland
+353 1 2315260/6
Fax: +353 1 2315202
http://www.goldinvestments.org
info@gold.ie
Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
http://www.gloomdoom.com
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
gwestgaard@investmentrarities.com
Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com
Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
http://www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com
Lone Star Silver Exchange
1702 S. Highway 121
Suite 607-111
Lewisville, Texas 75067
214-632-8869
http://www.discountsilverclub.com
Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
http://www.milesfranklin.com
Contacts: David Schectman,
Andy Schectman, and Bob Sichel
Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com
Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com
http://www.buysilvernow.com
Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com
The Moneychanger
Box 178
Westpoint, Tennessee 38486
http://www.the-moneychanger.com
Franklin Sanders
1-888-218-9226, 931-766-6066
----------------------------------------------------
HOW TO HELP GATA
If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.
By check:
Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA
By credit card (MasterCard, Visa, and
Discover) over the Internet:
http://www.gata.org/creditcard.html
By GoldMoney:
http://www.GoldMoney.com
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L
Donors of $1,000 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled GATA.
Donors of $200 or more will receive copies
of "The ABCs of Gold Investing" by Michael
Kosares, proprietor of Centennial Precious
Metals in Denver, Colorado, and "The Coming
Collapse of the Dollar" by James Turk and
John Rubino.
GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.
