The Indians love for gold is simply fantastic. Last year it is estimated that around 900 metric tons was imported by India to satiate the hunger for gold of its citizens. At an average price of Rs 29000 per 10 grams it works out to a whooping sum of Rs 2,61,000 crores or $ 52,200 millions or $ 52.2 billions. For a country whose Foreign Exchange reserves are around $ 300 Bn this is equivalent to app. 17.5%.
Gold is basically a hedging asset unless it is used in industrial applications. Therefore every year nearly 18% worth of our foreign exchange reserves will be converted into a nonproductive asset. At our stage of development it is a colossal wastage of the scarce resource of foreign exchange of which we are always short. The result is that dollar keeps appreciating against the rupee . One of the main contributory reasons for the rupee sliding from Rs 44 a few months ago to the present Rs52 to the dollar is the continued high volumes of gold into the country.
India is always on the negative side in terms of trade balance.For example last year against export of app. $ 300 bn the imports were to the tune of app. $460 bn thus a net outgo of $ 160 bn was there. The gold imports of $52.2 bn were around 32% of the foreign exchange outflow.
Throughout history gold has been valued very highly by almost all soceities.Most of the human achievments are rewarded in gold,like the Olympics,the Nobel prize medal or are gold plated.Wedding rings are made of gold,exchanged at the golden moment by couples having golden hearts with the blessing that they should celebrate their golden fiftieth wedding anniversary. Thus gold has emotional symbolism attached to it which is simply not going to be possible to be reduced by an equally emotional Indian society .
The World Gold Council has estimated in 2005 that against the annual supply of 3,859 tonnes of gold the consumption is around 3,754 tonnes thus leaving a surplus of 105 tonnes. In 2010, India was the largest consumer of gold(745.7MT) followed by China(428MT) and USA(129MT).and the estimated global consumption was 2060MT. Thus India accounted for nearly 36% of the world's gold consumption. It is interesting to note that their was a 64% rise in gold consumtion by India in 2010 when compared to 2009 figure of 442 MT. Present annual consumptions are between 900-1000MT levels.
The price of gold since April 2001,has increased nearly five fold to a high of $1,913 per ounce (31.10 gms) and is now around $1,600+ levels. In India gold is selling at app. Rs29,000 per 10 gms as against Rs 8,500 per 10 gms in 2006.
South Africa was the largest producer of gold in the world till 2007 when China overtook it by producing 276 MT that year.In end 2009, it was estimated, that all the gold ever produced was 165,000 MT having a total value of $ 8.8 trillion at $1,600 per ounce value. In 2010 the World Gold Council estimated that India had over 18,000 MT of above ground gold stocks equivalent to app.11 % of world stocks and was worth app. $ 800 bn.
The Indian fascination for gold is not expected to reduce with passage of time. The wide range of gold jewellery is simply loved by Indian women esp. at their own marraiges and every function thereafter.Indian men also have a love for chains and finger rings. Nowadays gold is also purchased for investment reasons as its price has risen significantly giving very handsome returns.
The most ductile and malleable of metals, gold readily creates, alloys with most other metals.Gold is also used in electronis,dentistry,electrical wiring etc. Around 50% is used in jewellery,40% in investments and 10% in industrial uses.
India and Indians are going to continue owning gold as they have been doing from time immemorial.
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