One in five Indians is willing to buy gold even if prices rise

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One out of every five Indians is willing to buy more gold even if prices rise, says a survey by the World Gold Council and industry chamber FICCI. The survey, part of a report, ‘Why India Needs a Gold Policy’, released here on Tuesday, said: “Among respondents, 19 per cent said they would buy more gold if prices rose and 34 per cent said their behaviour would not change. Only 14 per cent said they would stop buying gold if prices increased, while just 6 per cent said they would sell.”
The survey covered 5,000 respondents and was conducted during the period when the erstwhile United Progressive Alliance Government increased the import duty and the Reserve Bank of India brought in the ‘80:20’ scheme (scrapped recently) to check the ballooning current account deficit (CAD) in July 2013. Gold accounts for nearly half of the deficit. During the past five years, the average annual demand of gold has been 895 tons, equivalent to nearly 26 per cent of its total physical demand worldwide. Since India has little domestic supply, it depends heavily on imports.
The survey also found that consumers continue to buy gold regardless of their circumstances, as 77 per cent of the respondents bought gold at least once in 2013; more than half bought more gold in 2013 than in the previous year.
A good 77 per cent said they bought gold as a safe investment, while 53 per cent considered it primarily an adornment and 50 per cent believed that it was for both.
In terms of monetisation of gold, half of the people surveyed said they would be willing to deposit their gold to earn interest, 72 per cent said they were happy to receive different gold than their initial deposit, 62 per cent said they would prefer cash or India-branded coins at maturity. The council estimates that around 22,000 tons of gold in Indian households can be used to fund economic growth.
Policy suggestions
A report based on the survey has recommended a seven-point agenda for the new gold policy, including driving gold standardisation so that buyers and sellers have faith in quality and price, introducing gold-backed investments and saving products, and revitalising the Gold Deposit Scheme.
It also suggested setting up an India Gold Exchange and a Gold Board, developing accredited refineries and allowing Indian banks to use gold as part of the liquidity reserves.
“Consumption of gold has always been intertwined with the Indian household’s financial planning goals and has, through generations, remained a natural choice of saving of all households,” said A Didar Singh, Secretary General, FICCI.
Somasundaram PR, India Managing Director of the World Gold Council, said the need of the hour is to re-engage all stakeholders to develop a coherent long-term ‘India Gold Policy’ that “results in a robust infrastructure for gold, drives standardisation and transparency, encourages gold-based investment products and supports the economic priorities of the country.”
Source: Hindu business line

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