India has surpassed China in gold imports
India has historically been among the top importers of gold. The love for gold among Indians stays high irrespective of the generations. Festivities and the wedding season have been giving gold lovers a chance to invest in gold. But as we know, gold is a dollar-denominated asset imported into India in large quantities per year.
According to the WGC’s (World Gold Council) third quarter report, India surpassed China in gold buying. The graph below compares the historical demand for gold in India compared to the rest of the world.
The likely decline in the price of gold in the third quarter gave a boost to gold buying in India. The fall in the price of gold has led to a fall in gold-backed ETFs such as the SPDR Gold Shares ETF (GLD) and the iShares Gold Trust (IAU). Shares have also fallen for mining companies such as New Gold (NGD), Newmont Mining (NEM), and AuRico Gold (AUQ). These three companies make up 8.4% of the VanEck Vectors Gold Miners ETF (GDX).
Gold schemes for India
Since India is importing a substantial quantity of gold, it’s also spending a vast amount of its dollar reserves on gold. India’s gold-hoarding behavior has impacted the current reserves, further adding to the deficit of the country. The new government in India is aiming to improve the balance of payment by slashing gold imports.
The government has introduced three gold-related schemes.
- India is introducing gold coins with national emblems for Ashok Chakra and Mahatma Gandhi on its two sides. It expects to put about 20,000 metric tons of idle gold into productive use.
- India is implementing the sovereign bond scheme with an eight-year tenure, allowing an exit option after five years.
- India is introducing a gold monetization scheme.