http://www.investmentcontrarians.com/gold-investments/indian-gold-bullion-demand-higher-than-expected/1061/ When it comes to commodities such as gold bullion, there are several criteria that ultimately determine the price level. Many times, I have discussed the impact that easy monetary supply, commonly known as money printing or quantitative easing, has on the economy.

1. http://www.investmentcontrarians.com/gold-investments/indian-gold-bullion-demand-
higher-than-expected/1061/
Indian Gold Bullion Demand Higher
Than Expected
By Sasha Cekerevac for Investment Contrarians | Nov 28, 2012
When it comes to commodities such as gold bullion, there are several criteria that
ultimately determine the price level. Many times, I have discussed the impact that easy
monetary supply, commonly known as money printing or quantitative easing, has on the
economy. Quantitative easing is a well-known phenomenon these days, and the current
environment is interesting in that numerous central bankers around the world are
engaging in the same monetary policy, trying to print money to solve short-term
problems, irrespective of the long-term side effects.
In my article “Gold Bullion Forecast for 2013,” I stated that, when considering the level
of monetary policy stimulus worldwide, it is highly likely that gold bullion will exceed
$1,800 shortly, with a strong possibility for gold prices reaching $2,000 an ounce in
2013.
However, new information makes this prediction even more probable. The demand side
of the equation for gold prices is extremely important. India has long been a huge
consumer of gold bullion. Recently, however, because of the weak rupee, India’s
currency, gold prices in that nation have been at all-time highs. This has led to lower
levels of gold bullion buying and, earlier in the year, a strike by gold bullion dealers to
protest an import tax imposed by the government on gold bullion.
In spite of lower than normal gold bullion demand by Indian buyers, gold prices have
remained extremely strong. A new report by the World Gold Council’s India office stated
that they believe Indian demand for gold bullion in 2012 will end up reaching
approximately 800 metric tons, a substantial increase from earlier estimates of 650–750
tons. (Source: “India 2012 gold demand likely to rise 23%,” MarketWatch, November 27,
2012.)

2. India’s government has been trying several tactics to reduce gold bullion imports, which
weaken the country’s current account deficit. In spite of the government’s attempts, such
as preventing banks from issuing loans on gold bullion purchases and hiking the import
tax rate, the earlier drop in demand has not led to a sustained decline for gold prices. It
appears that Indian demand is coming back on line, especially with the wedding season
and holidays in full swing.
Chart courtesy of www.StockCharts.com
If Indian gold bullion buyers resume their normal level of purchases, we should see this
demand translate into higher gold prices. Knowing that the Indian demand for gold
bullion was lower than usual for most of this year, any increase back to normal levels
should help propel gold prices above $1,800 an ounce.
Of course, Indian politicians may try once again to impose restrictions on importing gold
bullion. Over the short term, this might have the reverse effect, causing a large amount of
demand ahead of any new rules and restrictions. Time will tell; however, the long-run
implications of Indian gold bullion demand resuming normal levels is clearly a bullish
sign.
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