Demand and Supply Analysis of Gold in Indian
Demand and Supply Analysis of Gold in Indian
Demand and Supply Analysis of Gold in Indian
ANALYSIS OF GOLD IN
INDIAN MARKET
GOLD
Gold is an element and a mineral. It is highly prized by people
because of its attractive color, resistance to tarnish and its many
special properties - some of which are unique to gold. Its rarity,
usefulness and desirability make it command a high price.
Trace amounts of
gold are found almost everywhere but large deposits are found in
only a few locations. Although there are about twenty different
gold minerals all of them are quite rare.
SUPPLY
MINE PRODUCTION
Global mine production
increased by 16.2% from 2,498
tonnes in 2007 to 2,861 tonnes
in 2013. New supply has been
partly spurred by the sharp
increase in the gold price, which
more than doubled between
2007 and 2013.
Mines in the top 15 gold
producing countries extracted
2,177 tonnes of gold in 2013,
76% of the world total.
The six largest producers, China,
Australia, the United States,
Russia, Peru and South Africa,
extracted more than half of the
gold mined globally.
The key growth areas for mining
in recent years include China
and Mexico: Chinese gold
production increased by almost
half (47%) between 2007 and
Recycling of gold
Recycled gold refers to gold sourced from previously fabricated
products that is subsequently refined back.
Recycling accounts for around one third of the total supply of gold
(2012 - 37% of the global supply of gold). The output of recycled gold
has increased by 60% since 2007. This supply response has been far
more significant than in mine production, where development lead
times and other barriers limit rapid responses.
The recovery of gold from previously fabricated products destined for
recycling is more likely to occur in countries with high gold
consumption as this provides a ready source of material and, as a
result, gold recovery activity is not tied to geological conditions in the
same way as mine production.
India
The Indian gold market is fed by a number of alternative sources,
including recycled gold, domestic production and unofficial imports
Recycled gold in India rises 44.5% to 61.3 tonnes(Q3 2013). when the
supply side was constrained due to government policies, 61.3 tonnes
of old gold were offloaded by Indians. They took advantage of the
The high import duty and supply curbs on gold had a telling effect on demand for
gold in the first quarter of calendar 2014 when demand slid 26 per cent to 190.3
tonnes.
Gold demandin India for the second quarter of 2014 calender year declined by 39
per cent to 204.1 tonne compared to the overall demand in the same quarter last
year according toWorld Gold Councilreport.
Gold has always been an object of desire. Individuals seek it out for personal
wealth and security. The value of money appeals above all other appeals in our
world.
The following are the factors which are influencing gold prices:
Demand of gold
Inflation
Import duty
Behavioral reasons
Value of US dollars
Interest rates offered by banks
An unproductive
investment
Deprives
financial markets
of funds
Widens current
account deficit
55962.3
489487.
5
11.44
20122013
61409.9
491487.
2
12.50
The government has tried to tackle the problem, raising import taxes and
considering changing regulations so that less gold comes into India via the
banking system
In August 2013, the finance ministry had banned banks from selling gold
coins in order to contain the countrys burgeoning CAD.
Gold imports are estimated to have declined by 41 per cent to 500 tonnes
in 2012-13 financial year on account of curbs imposed by the government.
The Reserve Bank of India (RBI) thinks that a CAD of 2.5 per cent of the
gross domestic product (GDP) is sustainable. Against this, Indias CAD in
2011-12 was 4.2 per cent of GDP and in the last quarter for which data is
available, October- December 2012 was 6.7 per cent of GDP. The greater
the gap between the sustainable CAD level and the actual figure, the
more vulnerable the economy is to adverse global developments which could
suck out foreign investment.
On the quantitative front, RBI introduced the 80:20 formula un- der which
80 per cent of imports would be for domestic demand while 20 per cent
of total imports would have to be re-exported through value additions in the
form of jewelry.