Tuesday, March 20, 2012

India's Love of Gold

http://www.wallstreetdaily.com/2012/03/20/india-duty-on-gold-imports/


The Economic Downside to India’s Love of Gold
India’s love affair with gold stretches back for many generations.
And it’s not just alluring as a store of investment value. For Indian culture, the yellow metal is a sign of high status, affluence and prestige.
Simply put, the more gold you can wear and own, the better.
It’s why the country is the world’s biggest gold buyer, importing over 900 tons of gold each year. Much of it goes to its thriving jewelry industry, with the World Gold Council stating that Indian jewelry demand for gold totaled 567.4 tons in 2011, versus 366 tons worth of investment demand.
Now you might think that the furious gold bull market over the past few years – and the massive runup in prices – would have deterred Indian gold buyers.
Not so.
Despite predictions of a flat year, if not a slowdown, India snapped up a record 969 tons of gold last year – a slight increase from 2010.

1 comment:

  1. From India Times: "However, he added that such imports do not have a direct bearing on foreign exchange reserves, as RBI intervenes in the foreign exchange market through purchase/sale operations to curb excessive volatility and restore market orderliness.

    Meanwhile, to lower the impact of gold imports on balance of payment, Mukherjee has proposed to increase basic customs duty on standard gold bars, gold coins of purity exceeding 99.5% and platinum from two per cent to four percent and on non-standard gold from five per cent to 10 per cent.

    To a question, he said the quality of country's gold bearing ore was "extremely poor" and as a result, it becomes uncompetitive to mine such ores to produce the precious metal indigenously.

    India has around 30 gold mines. Each tonne of Indian gold bearing ore yields only 22 gms of gold, Mukherjee said, adding that experts opine that unless each tonne ore does not produce 45-50 gms of gold, then the exercise becomes uncompetitive.

    India produces around two tonnes of gold a year against the imports of 900 tonnes, he added."

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