Indian Gold History

 Gold is a brilliant yellow precious metal that is resistant to air and water corrosion. It is a very soft and pure metal(24Kt.). Gold is the most malleable and ductile metal found on earth. That's why it is expensive and it is alloyed with other metals, usually copper and silver to make it less expensive and harder. A karat is the unit that measures the purity of gold jewelry or else it is hallmarked with a three-digit number that indicates the parts per thousand of gold. The alloyed gold comes in many colors and may not be bright yellow all the time.

Overview:

 World's largest gold producing country is South Africa with 394 tons in 2001. On the other hand, world's largest gold consuming country is India with an annual demand of 843.2 tonnes comprising of 26.2% of total world demands.

 World's gold demand is constantly increasing and it is nearing record levels at 4000 tonnes per year while the mine production is constant at 2250 tonnes per annum (Source: World Gold Council)

 The gold prices are moving upwards due to the reduction in production level as compared to the demand and also due to the weakening economy of the US.

 It has been found out the total world gold production would decline about 30% over the next 7 years as the new discoveries in the major gold producing countries have become difficult, expensive and time consuming according to the studies done by The World Bank and Beacon Group.

History of gold in India:

  Prior to 1962, India was the world's largest gold market and the main trading center was Bombay. In 1962, the government enacted the Gold Control Act, which prohibited the citizens of India from holding pure gold bars and coins due to loss of reserves during the indo-china war. It was declared that the old holdings in pure gold had to be compulsorily converted into jewelry. Pure gold bars and coins were to be dealt only by licensed dealers.

  A large unofficial market sprung up which dealt in cash only as a  consequence of this legislation that adversely affected the official gold market. This also made way for smuggling and black marketing, which comprised of many jewelers and bullion traders.

  In 1990, India was on a verge of default of external liabilities as it had a major foreign exchange problem. It had to give up the concept of controlling and licensing as it led to nothing more than corruption and shortages. As a result, the Indian government pledged 40 tonnes from their gold reserves with the Bank of England. India had to adopt the concept of liberalization. The government abolished the 1962 Gold Control Act in 1992 and liberalized the import of gold in India for a duty payment of Rs. 250 per 10 grams. The government made up for the foreign exchange problem by allowing free imports and earning the taxes. This step expanded the gold market and it also waved off the unofficial trade i.e. smuggling and black marketing. This makes India the most price-sensitive market for gold in the world.