India is the world’s largest gold market involume terms, one that has expandedconsiderably during its period of liberali-sation. This report provides a broadoverview of the gold market within thecontext of India’s new super-chargedeconomy. It looks at all the major aspectsof demand and supply, including how the jewellery sector is being affected by thecurrent social and economic changes,new ways to invest in gold, the role of the Reserve Bank of India and on thesupply-side, mine production and thescrap market.
Market size: A league of its own
India is the world’s largest consumer of gold in tonnage terms. In 2005, Indiaaccounted for 22% of global gold jewellery demand and 35% of all net retailinvestment (coins and bars). Golddemand has grown at an average annualrate of 10% since the repeal of the GoldControl Act in 1990, which had forbiddenthe holding of gold in bar form
. Althoughestimates vary, India is now thought tohold close to 15,000 tonnes or 10% of theworld’s entire above-ground gold stocks.Sales have averaged 676 tonnes perannum over the past decade, which isone and a half times more than in theUnited States, the world’s second largestgold market in volume terms (it is thelargest in value terms), and betweenthree and eight times more than in China,Turkey, Saudi Arabia and the United ArabEmirates, the world’s other main gold-consuming countries (Figure 1). Thestrength of demand over the past decadeis especially impressive when juxtaposedagainst the price, which has risen almostcontinuously in rupee terms over thesame period (Figure 2). Likewise in 2005,despite a 6% rise in the gold price inrupee terms, gold consumption rose to750 tonnes from 639 tonnes the previousyear, with growth in each category (jew-ellery, coins and bars, medallions andimitation coins, electronics and otherindustrial and decorative uses).
The Role of Gold in India
By Natalie Dempster, Investment Research Manager, World Gold Council
For a full discussion on the de-regulation of the Indian gold market see:
Deregulation of Gold in India
. Himadri Bhattacharya, World Gold Council, March 2003.
Figure 1: Annual Demand
for Gold (tonnes) 10 year average, 1996-2005
0100200300400500600700800IndiaUnited StatesChinaTurkeySaudi ArabiaUAE
Source: GFMS Ltd.
Jewellery, coins and bars, medallions and imitation coins, industrial and decorartive uses