Set to surpass in gold consumption after New Delhi’s stringent rules.
By Rajiv Theodore
NEW DELHI: From birth to death and beyond, the Indians’ tryst with gold never seem to cease. Its common practice in parts of India to spoon in gold dust laced with honey through a new born baby’s lips. Similarly, after death, gold coins are placed in the mouth of a corpse in the belief that the precious metal would provide for resources in the after-life. Most of the weddings revolve around gold and its absence is unimaginable in marriages in India.
Marriages apart, India’s love for gold transcends gender, the rich and the poor, Hindus and Muslims. The yellow metal is one of the very few common threads that could be found binding its way amongst a plural and disparate society like India’s. Since ancient times the metal has been a safe and effective way of saving and transferring wealth from one generation to the other. It is seen as a symbol of social status, prosperity, well being and of great cultural importance.
This obsession with gold comes with another twist.
India does not have any gold of its own and imports one-third of the world’s production. But the obsession has, however, contributed to a high import bill; in fact, the second highest after crude oil and give sleepless nights to the government, prompting it to take several measures to curb its imports. The government has slapped a record 10% duty on gold imports making it expensive in the domestic markets, discouraging buyers and has also spawned a network of smugglers through India’s porous borders.
All this has led to a drop in gold consumption in India. Now, China is seen emerging as the global leader in gold consumption.
In its latest report, the World Gold Council (WGC) has pointed out that China is set to surpass India in gold consumption thanks to New Delhi’s stringent rules. The consumer demand for gold defined by WGC are jewelry, bars and coins acquired by individuals and this had slumped to 32% to 148.2 metric tons in the July-September period, compared to the year earlier.
Compared to that, the demand in China rose 18% to 209.6 metric tons. Why? Mainly because China has begun to take advantage of the fall in global gold prices and its government has lifted restrictions on its import, unlike India.
China pursued a gold policy right from 2000 with the launching of the Shanghai Gold Exchange (SGE). The SGE went on to become the biggest physical gold exchange in the world. By July 2013 the delivery of gold contracts to the SGE exceeded 1000 tons or 40% of the total global production.
Also, in 2010, banks were instructed to help China develop it national gold market which offered finance for purchase of overseas gold mines, supporting individual trade gold on the SGE and selling their own branded gold bars.
Last month, China’s central bank allowed more firms to export and import gold. It also eased laws on individuals trading in gold. And most of all, China is buying gold to diversify and dilute its US dollar assets and promote the Yuan as the world’s reserve currency.
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