Monday, July 30, 2012

India's demand for gold makes US glitter

India's love for gold dates back thousands of years. The yellow metal has been the revered financial asset of the Indian people. And it continues to be so even today. The statistics say it all. 25% of the gold sold globally is purchased by India. As per a recent report, Indian households hold gold worth more than US$ 950 bn. The Indian government and the Reserve Bank of India (RBI) are not too happy about India's high  gold imports. This is because it adds further burden to India's already high current account deficit. But someone on the other side of the globe is all smiles. We are referring to the US and the other countries in the Americas. This region is set to become India's biggest gold supplier. There are several reasons why this is very likely to happen. Though China is the one of the biggest producers of gold, it uses a significant chunk of its production to build up its national reserves. Moreover, there are high entry barriers for private miners in the dragon nation. Ditto for Russia. Certain gold reserves in Europe are facing environmental hurdles. Other big producers such as South Africa and Australia are becoming unpopular due to high taxation and high cost of production respectively. That puts the Americas in an advantageous position. What favours this region even more is the fact that they hold the biggest share in the significant global gold discoveries between 1997 and 2011.

No comments:

Post a Comment