India Finance Minister P Chidambaram. (

July 16, 2013 (TSR-Mineweb) – India‘s Finance Minister P Chidambaram has appealed to the people, once again, to moderate their demand for gold. While insisting that the government would not rule out a complete ban on gold imports, as has been discussed in some quarters, he pointed out the precious metal has cost the nation $50 billion in foreign exchange.

Stating that there is a long time attachment to gold in India, the minister asked, “Can we for sometime moderate the demand for gold?”

Asking investors to cut down on their purchases as a starting point, Chidambaram suggested buying 10 grams of gold if one was inclined to buy 20 grams of gold.

Though India’s gold imports in June have fallen 80% to about 32 tonnes, providing some relief to the country’s current account deficit and the weak rupee, the minister used a media conference on July 16, as a platform, to appeal to the citizens, all over again.

June’s imports were a sharp drop against the record May imports of 162 tonnes, but only a 36% dip over the June 2012 level of 50 tonnes. A series of measures taken by the Indian government and the apex bank since mid-May appear to have helped stem the import of gold.


However, a new study has noted that the price of gold in India is expected to surge to $472 per 10 gram (Rs 28,000) again in the next few months, as demand increases due to the wedding season that starts in August.

A study by the Associated Chambers of Commerce and Industry of India (Assocham) on gold trends, has indicated that the price of gold will hover between $446 (Rs 26,500) and $463 (Rs 27,500) before crossing $472 per 10 gram around November and December.

The study has noted: “We tend to disagree with the general discourse among analysts who say that the gold has lost its flavour in favour of equities, largely on the back of improvements in the US economy.”

Assocham president Rajkumar Dhoot said, “Even if the  assumption that the US economy is improving is correct, then the next consequence would be increase in inflation in the American economy. At that point, gold will again be seen as a safe haven against inflation.” He added that gold is already building demand in the global markets, which is a telling sign.

A sharp correction in prices from a high of around $1,800 per troy ounce to about $1,200 is also motivating major central banks in the world to build on their gold reserves. Even in the international markets, the end-user demand is seen at these levels and downside is not significant, he said.

Dhoot added that though gold exchange traded funds (ETFs) are a fraction of the overall bullion trade, Indian investors in ETFs have lost significantly and are not expected to return for some time.

An earlier Assocham study had predicted that the price of gold could slide below $421 (Rs 25,000) per ten grams. Queried on the change in stand, Dhoot said, “Our assessment was done before the government had increased the customs duty and placed other import restrictions through the banking channels.”

The Assocham study was based on inputs from several domestic and international analysts and those in the bullion trade and fund managers.

Continuing pressure on rupee is also expected to influence gold prices in the domestic market as the landed price would increase with currency depreciation, he added.


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