via Kedrosky
While I knew that India was the most important world market for gold, this is still an eye-opening first paragraph from Morgan Stanley's economic group:
After a short weak trend in 2009 due to the global credit crisis, India's spending on gold has bounced back sharply in 2010. India's gold consumption (in USD terms) has risen by almost 100%Y during the first three quarters ending September 2010 after declining 12%Y in 2009. Cumulatively, India now holds over 18,000 tonnes of above-ground gold stocks worth approximately US$800 billion at the current gold price - nearly 50% of the country's GDP. This represents 11% of the world's stock, according to World Gold Council1 (WGC) estimates. On an annual basis, India is the world's largest consumer of gold in tonnage terms, followed by China. During the four quarters ending September 2010, India's gold demand accounted for 21% of global gold demand.
So it's going to end, right? This can't go on, can it? Well:
A shift away from gold into financial savings is unlikely to happen in a hurry. We believe that there are a complex set of drivers behind Indian households' fetish for gold. While the government is continuing its effort to channel these savings into more productive financial assets, we believe that this shift is unlikely to materialize in the short term.
More here.
