19 Nov 2017
by Nathan McDonald, Sprott Money:
For anyone that has followed my writing for some period of time, you will remember the series that I wrote, which broke down India’s war on gold and how it was going to fail in its goal – and fail spectacularly it did.
This series went on and through time, my initial estimations were proven correct – the officially reported number of gold imports did indeed crash, but this was simply because the black market exploded. Smuggling of gold into India increased dramatically and all kinds of innovative ways of getting the metal into the country at reduced costs were created. The free market exerted its will and as always, won the day.
Undoubtedly, there was some reduction in imports, but not as much as the government of India was hoping for. Yet, there was one other predication that was made during this time period, of which has also been proven correct through time. The demand for silver was going to explode.
India in the past has had a history of being the largest importer of the yellow metal, which it has only recently been dethroned from. Their appetite for gold is insatiable and therefore it was only logical to assume that a large percentage of the funds intended to flow into gold, were going to go to the next best thing: silver.
This has and continues to prove to be the case. As reported, imports of silver in September exploded higher, increasing by a whopping 152% year over year! This is coming on the back of an already significant surge seen in the month of August.
566.778 tons of silver were imported throughout the month of September, up from 225 tons in September 2016. This is a massive and huge increase, indicating that India’s appetite for precious metals not only remains strong, but is increasing, despite the government’s best efforts to clamp down on it. In fact, this was the highest level seen since 2009.
Meanwhile, in the West, precious metals continue to be scorned and ridiculed, cast aside and forgotten as the latest and greatest thing continues to siphon funds out of this market. Cryptocurrencies, led by Bitcoin, continue to drain funds that would otherwise have gone into the precious metals space.
This is not entirely a bad thing, unless you are fully committed to the precious metals space. As many of you know, I have been a long time supporter of Bitcoin, writing about its value from its infancy. But, still, as I have always stated, it is no replacement for gold and silver, which have stood the test of time for over 10,000 years and will continue to do so for the foreseeable future. They are two different assets and play two different roles in the protection of your portfolio.
I expect 2018 to be the year of gold and silver’s resurgence after the monumental explosion seen throughout this year in the price of Bitcoin. A price increase that has made many feel like they have “missed the boat”, which will cause them to search for other opportunities.
I expect the West to once again wake from its slumber and take cues from countries such as Russia, China and India, who continue to take prudent steps and diversify into hard assets.
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