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Falling Gold Prices "Good News" for India

THIS YEAR'S fall in world Gold Prices could prove helpful to India's economy, according to a Citigroup analysis quoted by Livemint – the Wall Street Journal's financial news offering in the sub-continent.

"[Oil and gold] are India's top two import items," says the report, pointing to the surge in India's balance-of-trade deficit as energy and bullion prices have risen in recent years.

"Lower oil [and Gold Prices ] could make the viscious cycle turn virtuous," Livemint says.

The value of India's gold and silver imports has "soared" according to Business Today, quoting figures from Minister of State for Finance Namo Narain Meena.

Rising silver and Gold Prices in fiscal-year 2012 saw the value of India's precious-metal imports top $61.5 billion, the government says, up nearly three-fold from 2009.

"As far as gold and silver are concerned," says Meena, "India is a net importer and the prices of these precious metals depend on international prices."

The Indian Rupee however fell to a fresh record-low versus the US Dollar today, further undoing the drop in Gold Prices on the international market. Peaking at new record highs in early May, the Rupee price has since slipped less than 2%.

The US Dollar Gold Price, in contrast, is down almost 20% from its all-time high of Sept. 2011.

"In addition to portfolio shifts" by investors worldwide, says LiveMint, the fall in world Gold Prices "could be a result of the Indian government’s recent focus on curbing gold demand [via] steps include raising import duties on gold from 2% of the value to 4% and restraining loans against gold collateral.

"All these measures, coupled with sharp depreciation in the Rupee, have resulted in lower imports," down 29% year-on-year in the first 3 months of 2012.

Formerly the world's #1 consumer market for physical gold, India has been overtaken since Oct. 2011 by private demand in China.

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