After a short weak trend in 2009 due to the global credit crisis, India’s spending on gold has bounced back sharply in 2010. India’s gold consumption (in US$ terms) has risen by almost 100% YoY during the first three quarters ending September 2010 after declining 12%YoY in 2009. Cumulatively, India now holds over 18,000 tonnes of above-ground gold stocks worth approximately US$800bn at the current gold price – nearly 50% of the country’s GDP.
Gold Vs Bank Deposits Vs Equities:
Gold holdings among Indian households at current market value are about 2.5 times the current equity stock holding of US$315 billion. Bank deposits by households are currently valued at US$625bn, according to our estimates.
India holds 11% of the world’s stock, according to World Gold Council1 (WGC) estimates. On an annual basis, India is the world’s largest consumer of gold in tonnage terms, followed by China. During the four quarters ending September 2010, India’s gold demand accounted for 21% of global gold demand.
Why Indians Love Gold ?
Holding gold is an old tradition deeply ingrained in Indian culture and society. Traditionally, apart from being an item of consumption in the form of jewellery, high demand for gold stemmed from low penetration of banking facilities, restricted laws of inheritance, hedging against inflation, and being a medium of hiding unaccounted income [BlackMoney] REcall how 9 Kgs of Gold was found in the office of LIC’s Investment Secretary.