Gold consumption is an inseparable part of India‘s culture and tradition though Indian’s forever love for the metal is no more a big celebration for Government of India. Despite gold’s largest mines are located in Africa, Indians are known to their craziness for the gold buying. It’s used in gold jewellery, manufacturing gold leaves, Ayurvedic medicines, and covering buildings like Swarn Mandir (Golden Temple) in Amritsar, Punjab.
Since the discovery of yellow metal, it has been receiving attention from South Asia sub-continent making India as the biggest gold consuming country in the world. In 2012, China emerged as the second largest gold buying country importing more than 770 tonnes following India (total consumption of 800 tonnes).
Having gold shows the richness of a country and its people, however importing gold may make worry the country’s economy, which is why importing gold is turning into a big threat to Indian economy. To discourage this practice Indian government raised import taxes on the metal twice in the year 2013. The effort did considerable effects on the importing trend as the demand of gold is reduced due to higher prices.
Christin Tuxen, an analyst at Danske Bank says, “Prices are likely to hover around current levels ahead of the ECB meeting this afternoon, as investors will watch to see whether (ECB) President Draghi talks about negative interest rates.”
“And of course people are looking at tomorrow’s U.S. non-farm payrolls, which will be instrumental to judge whether the Fed tapering is going to come sooner rather than later – whether it is in September or December that this will be announced is the big question for everything that is dollar sensitive at the moment, including gold,” He includes.
The country’s officials are strict to discourage gold import even they are ready to increase import tax duty to fulfil the requirement of the time.
On the other hand, gold has become an essential in Indian marriages regardless the religions, caste or race, peoples have to buy at least 10 grams to 100 gram metal to exchange during the ceremony due to unofficial social norms.
HSBC analyst James Steels says, “Duty hike may make bullion more expensive in India, gold prices in local currency terms are still trading at lower levels compared to last year and are still attractive to physical buyers.”
Similarly, China government is struggling the same problem of increasing gold purchasing resulting in spending more foreign currency. Hence Chinese officials have to use the same technique to discourage the demand which is motivating people to buy gold from overseas.