Indian Household gold vs top government gold holdings

Indian Gold Imports/Demand Strong Again in 2017

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Indian Gold Imports Rose 55% in 2017.

Despite rising gold prices and government efforts to reduce gold demand, India’s gold imports surged in 2017 to 901 tons up 54.8% from 2016 imports of 582 tons. Indian gold imports from 2008-2017 have averaged over 850 tons a year.

India’s 901 ton gold imports in 2017 were approximately 29 million ounces. Since India has virtually no domestic gold mining production, gold imports are a good proxy for gold demand in India. Due to the great demand for gold in India, gold often accounts for 10-20% of overall Indian imports, wreaking havoc with India’s balance of trade.

The Indian government has tried to curb gold demand with a 10% gold import tariff instituted in 2013, and a variety of jewelry and goods and services taxes. The taxes have not curbed gold demand and have resulted in increased smuggling. Analysts estimate the amount of gold in private Indian citizens’ hands and temples to be approximately 23-24K tons (approx 771,617,928 ounces), worth over 1 trillion dollars!

The World Gold Council estimates that about 190,000 tons have been mined in human history. This would mean that Indian citizens hold about 13% of the gold ever mined in the world.

Indian Household gold vs top government gold holdings

Indian household gold holdings far exceed the top gold holding nations’ gold reserves including India’s own central bank which holds 557.7 tons or the tenth largest gold holdings among nations.

India’s growing population and increase in income levels has created large and steady annual gold demand that shows no sign of abating. India launched a gold monetization scheme two years ago in an attempt to wrest some of that gold away from its citizens and temples. Under the scheme the Indian government offered Indians a chance to “loan” their gold to the government in exchange for interest payments. There was a tepid response from the Indian temples and little enthusiasm for the scheme among Indian citizen.

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Here is a chart of Indian gold imports from 1999 – 2017.

Indian Gold Imports 1999 - 2017 full year

Royal Bank of India Gold Reserves

India has had a culture affinity with gold for thousands of years. While Indian households and temples are estimated to own nearly 20,000 tons of gold, the Royal Bank of India lists just 557 tons of gold.

Global gold reserves top ten march 2018

Indian central bank gold reserves are tenth among individual nation central banks.

India’s War on Gold, Coming to a Close?

The Indian government appears ready to embrace gold rather than to continue fighting it. While gold has been Indians’ preferred asset class for thousands of years, earlier this month the Indian government announced that it intends to develop gold as an asset class as a matter of policy. Some of the initiatives include encouraging financial institutions to develop gold-backed financial products, developing regional regulated gold exchanges, supporting the gold recycling market, hallmarking and revamping/relaunching its gold monetization scheme. These efforts, along with recent innovations in “digital gold” offerings, will provide Indians with more gold options to store and trade their wealth in the coming years.

According to the Hindu Business Line the Indian goverment is set to roll out their new gold policy by early next month.

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This article by BGASC is not, and should not be regarded as, investment advice or as a recommendation regarding any particular course of action.