India buys a lot of gold

I’m not a financial expert, but this can not be good at all. India has purchased $6.7 billion in gold, swapping out U.S. dollars for the precious metal. Hopefully those in the know will try to figure out why. (Hint: Check out the chart below the fold.)

In the grand scheme of things, $6.7 billion is not a huge amount of money, but I think it sends a clear signal to the United States and Europe they need to get their financial house in order.

Hat tip to Gateway Pundit, with a link to the Financial Times.

Pranab Mukherjee, India’s finance minister, said the acquisition reflected the power of an economy that laid claim to the fifth-largest global foreign reserves: “We have money to buy gold. We have enough foreign exchange reserves.”

He contrasted India’s strength with weakness elsewhere: “Europe collapsed and North America collapsed.”

“This is a landmark trade,” said Jonathan Spall a director at Barclays Capital and a gold ­specialist. “Central banks are conservative institutions and India’s move is a sign for other central banks and sovereign wealth funds that were contemplating buying gold.”

New Delhi’s acquisition came months after China revealed it had almost doubled its gold reserves in the past six years.

What do you expect, when the United States government publishes deficit projections like this?