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India: The World's Most Important Gold Market?

October 21, 2010165 view(s)
There's a country that has an enormous impact on the price of gold globally, and therefore, on the U.S. market. India, the world's second most populous nation, is also the leader in terms of gold consumption. In India, yellow metal, also known as, gold biscuits, plays several roles. It's traditionally seen as a store of value, a hedge against the possibility of bad times. Gold jewelry is omnipresent, even in poor rural villages, and it's practically a necessity for traditional weddings. In addition, India has a growing and increasingly sophisticated investor class, who are as attuned to the problems posed by runaway spending, debt, and inflation as anyone else. Gold is a commodity, and its price is driven by supply and demand. That demand is split between jewelry demand and investment demand - and India is the source of most of the jewelry consumption. In addition, Indians are buying more gold coins. The Economic Times of India recently reported on the phenomenon. "Along with the increase in gold prices, the sales have picked up in the second quarter," Federal Bank general manager KS Mohan told the paper. "The highest sales for coins happen during Akshayathrithiya and Diwali. During this Akshayathrithiya period, we witnessed 300 percent growth and we are expecting the same growth in Diwali," said another bank manager at IndusInd Bank. As long as Indians are optimistic about gold - and they have been for a long time - there may be the reason to invest in the precious metal.
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