India's Obsession With Gold

By Kapitall | February 13, 2012 AAA


Written by Rebecca Lipman

Did you know India accounts for 32% of the global gold market, and half of that is just for jewelry bought for weddings.

A member of the World Gold Council in India said, "Demand for gold out of India is fundamental for the health of the industry. If India sneezes, the gold industry will catch a cold."

Indeed, India is one of the fastest growing economies on Earth and the largest consumer of gold. The metal is considered not only a means of wearable wealth, financial security and status, but is also considered sacred. A family that doesn't own gold is considered an "incomplete family.

60 Minutes reports the number of rich and middle-class Indians now outnumber the poor. On average, Indian families also save about 30% of household income, compared to America's saving rate of 5%. This increase in status and savings enables Indians to buy more gold.

Indians consider gold more of an investment than an expense. With the gold continually rising in price (and Indians do not necessarily believe prices will go down again) Indians are rushing to stores to purchase as much as their income affords.

Interactive Chart: Press Play to compare changes in market cap over the last two years for the stocks mentioned below.



Business Section: Investing Ideas
"No gold, no wedding" is a common catchphrase in India. As the country's middle and upper class populations grow, more gold is likely to be bought to show off the wealth, both during wedding ceremonies and in day-to-day activities.

The more gold demand, the higher gold prices. This is all good news for gold miners.

With that in mind we created a list of gold stocks with market caps over $300 million and net positive institutional purchases in the current quarter.

Institutional investors, such as hedge funds, think these gold stocks have more value to price in. Do you agree? (Click here to access free, interactive tools to analyze these ideas.)

1. Yamana Gold, Inc. (NYSE:AUY): Engages in gold and other precious metals mining, and related activities, including exploration, extraction, processing, and reclamation. Net institutional purchases in the current quarter at 32.8M shares, which represents about 4.42% of the company's float of 742.82M shares.

2. NovaGold Resources Inc. (NYSE:NG): Engages in the exploration and development of mineral properties primarily in North America. Net institutional purchases in the current quarter at 11.1M shares, which represents about 6.69% of the company's float of 165.88M shares.

3. Central GoldTrust (NYSE:GTU): Central Gold-Trust primarily invests in unencumbered gold bullion. Net institutional purchases in the current quarter at 1.2M shares, which represents about 7.21% of the company's float of 16.64M shares.

4. Aurizon Mines Ltd. (NYSE:AZK): Engages in the acquisition, exploration, development, and operation of gold properties in North America. Net institutional purchases in the current quarter at 8.6M shares, which represents about 5.33% of the company's float of 161.39M shares.

5. Lake Shore Gold Corp Ordinary S (NYSE:LSG): Engages in the acquisition, exploration, and development of gold properties in northern Ontario and Quebec of Canada, as well as in Mexico. Net institutional purchases in the current quarter at 113.3M shares, which represents about 30.07% of the company's float of 376.75M shares.

6. Jaguar Mining Inc. (NYSE:JAG): Engages in the production of gold, as well as in the acquisition, exploration, development, and operation of gold mineral properties in Brazil. Net institutional purchases in the current quarter at 7.7M shares, which represents about 11.79% of the company's float of 65.33M shares.

7. International Tower Hill Mines Ltd. (NYSE:THM): Engages in the acquisition, exploration, and development of mineral properties in Alaska and Nevada. Net institutional purchases in the current quarter at 4.5M shares, which represents about 6.54% of the company's float of 68.80M shares.

8. Richmont Mines Inc. (NYSE:RIC): Engages in the acquisition, exploration, development, and operation of mining properties, principally gold in northeast Canada. Net institutional purchases in the current quarter at 2.0M shares, which represents about 6.92% of the company's float of 28.89M shares.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Rebecca Lipman does not own any shares of the companies mentioned above. Institutional data sourced from Fidelity.

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