Gold is forever. People consider gold as true asset. Since time immemorial, it is one of the costliest metals. Its glitter attracts people and they love to wear it as ornaments. Gold has no or minimum affect of weather changes on it. Its rarity makes it expensive and every body likes to possess it. It has a universal value that has never changed (with time). Governments and central banks keep it as reserves. most of the persons, rich or poor, like to keep their savings in form of gold.

Indians are in love with Gold:

The predominant population of India is Hindus. They believe gold as a metal of gods and monarchs. Hindu religious books have mentioned gold as a commodity of immense value. People in India wear gold Jewelry for ornamental value on most of the social functions, festivals and celebrations. Hindu culture and their love for gold have influenced people of other religions in India. Therefore, all most all women in India like to wear gold Jewelry irrespective of their religious belief, social and cultural background. A large number of Indian men also wear gold Jewelry in form of chains, bracelets, and rings.

Whenever think gold, think of india, world's biggest consumer.

There are historical reasons for the same. India had been enjoying status of most advanced and rich country in the world for millenniums. India was called golden bird at those times. India had been exporting silk, spices, speaking parrots and many other consumer goods to Romans, Greeks and Egyptians in ancient times. India was the biggest producer of consumer goods at that time. They were the biggest exporters too. India had claimed two third of global exports at that time. They were exporting a lot but had nothing to import. Therefore, they imported gold and gemstones against their export. India has accumulated huge quantity of gold and it continues to do so. India produces huge quantity of gold Jewelry. Adherence to ethics enabled Jewelers trustworthy. Gold also enjoys safe-heaven status for investment.

Official gold import of India has estimated at eleven hundred tones. This figure does not include gold jewelry import and gold smuggled into India. It is generally assumed that India imports more than three thousand tons of gold.

In sixties Indian government had imposed a ban on official import of gold except against value added export of gold jewelry. Therefore, there was no official import those days. The only channel for import was smuggling. In 1992, the government has liberalized its policy and permitted non-resident Indians to bring in five kilograms of gold per person on payment of import duty in hard currency. The government has further liberalized gold import policy and allowed ten kilograms per person. Indian government now allows official gold import.

India has witnessed income tax slab up to ninety seven percent at one point of time. This resulted in large-scale tax evasion. The tax reforms of the last several years have indeed reduced the level of evasion. Parallel economy of black money is continuing in the country even today. One cannot keep cash that is black money in Banks. If they do so; they cannot hide it from the tax authorities. The most convenient way to keep unaccounted wealth is in the form of gold Jewelry.

Moreover, Indian rupee had been continuously depreciating against hard currencies in the twentieth century. It encouraged investors investing in gold at that time. Despite price fall in dollar terms gold has shown an up-trend in Indian rupee on the long-term basis. Therefore, Indians continue to believe gold as a safe tool of investment and hedge against inflation.

Gold price in India is higher than the international price because of import duty. Kolar is the only gold mine in India that produces small amount of gold. Due to huge consumption of gold in producing Jewelry and inadequate production, India continues to depend upon import.

Large population of India lives in villages. Many of them, in recent past, were too poor to have proper living arrangements. These poor people had negligible assets. They wanted to keep it in their physical possession all the times, because they had not even residences to keep it. Hence, wearable gold Jewelry was the only option for them. Floods and droughts were continual phenomenon of their lives. Those forced many villagers to flee to safer places. It was easy to carry gold Jewelry while fleeing in distress. They used to sell or mortgage it while in crisis and purchase it in good times.

Approximately ten million marriages occur in India every year. India has a tradition of gifting gold in the marriages. Rich, middle and poor all classes bestow gold in form of Jewelry upon their daughters. Rich and middle classes also have a trend of presenting gold Jewelry to the near relatives of the bride and the groom in marriages. These marriages require about one thousand five hundred tons of gold every year. It is evident that gold demand in India cannot easily go down.

Agriculture is the base of Indian economy. Gold Jewelry is popular among farmers too. Gold jewelry sales spurt after a bumper crop.

There are many religious, social and cultural festivals in India. Affluent people generally present gold ornaments in these festivals to females in their family.

India is a place of festivals. And India has a love for gold. Hence, both festival and gold is amalgamated in India.

Indian people love to buy gold especially when in festive mood. Akshaya Tritiya (Akha Teej) and Dhan Teras are special days among festivals of India for buying gold and silver.

North Indian people prefer to buy gold and silver on Dhan teras and Diwali whereas South Indians on Akha Teej. Bothe these festival days are considered auspicious for buying gold and silver in India.

People of India believe that gold and silver bought on these days of festival brings wealth and happiness. It is almost customory to buy gold and silver on Akha Teej, Dhan Teras and Diwali.

The jewelers use gold in diamond and color stones studded jewelry  (studded with ruby, sapphires, coral, emerald, pearl, tourmaline etc) besides plane gold Jewelry. They also use it while producing Kundan Meena Jadau Jewelry. India consumes as well as exports gold, diamond and Kundan Meena Jadau Jewelry and articles. All these require lot of gold.

India has grown as a major player in the software and BPO markets. Indian software engineers are highly rated in developed countries (US, EU, Canada, Japan etc). Non-resident Indians are very rich. They are the main sources of hard currency required for gold imports.

Some other uses: Rich people use golden embroidery in their expensive dresses. Some ayurvedic and homoeopathic medicines contain gold. Some people embed gold in the foundation of a new house. They consider it very auspicious. Some people place some gold in mouth of a dead body at the time of funeral. Painters use gold in their paintings. It is a common trend in India to gold-paint idols, temples and monuments. Gold painted handicraft items are also popular in India. Thin flaps of gold (barak or tabak) are also used in expensive sweets. Gold has some industrial uses too.

It seems that Indian Gold demand will remain high with economic prosperity of the Indians.

However, change in attitude may benefit India this particular time. It seems that gold price will go down globally in near future. India, China and Middle East have been the major buyers of gold in recent years. China has been exporting much and has huge trade surplus. It has been buying gold out of that surplus. However, its export and trade surplus has also been declining. Crude price soared in recent past that enabled Middle East countries to purchase more gold. Now crude price has shown a low of $ 33 (19 Dec. 2008). Fall in crude price has seriously affected their purchasing power. Moreover, Saudi prince has lost huge money in City Bank down fall. IMF has also declared its intention to sell one thousand tons of gold. All these will affect gold demand and its price.

India has accumulated huge quantity of gold but it lacks in infrastructure. India needs huge investment in infrastructure sector. They are looking for foreign investment in this field that is not likely to come easily. India cannot maintain its growth rate without huge investment in infrastructure. It also needs to put money in agriculture sector but there is not enough money.

It is better for the Indian government to encourage people to convert their gold investments into infrastructure investment. If they come with a policy for the same it can change the economic destine of Indians.

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