Indian Gold Book:Indian Gold Book - Gold Bars Worldwide

BAR HOARDING
Bullion dealers and jewellery retailers in urban and rural areas generally reported that, in their view, bar
hoarding by the public is low.
The exceptions were some trade entities in Mumbai and Ahmedabad.
In major cities, speculative trading in TT bars occurs but the number of speculators is regarded as small and confined
mainly to the “elite”.
Anecdotal evidence suggests that the net increase in bars hoarded may have been as low as 20 tonnes in 2001.
The level of net bar hoarding is an unresolved issue. Some Indian analysts believe it may be higher than the estimates
in this report.
PERSPECTIVE
Several reasons for the low level of bar hoarding were advanced.
• Owning imported TT bars implied an association with the underground economy. Even if bought with legitimate funds,
bar ownership would be queried by the tax authorities.
• Many people were still not aware that TT bar ownership, banned during the period of the Gold (Control) Act, was now
legal. Even those who were aware that it is legal felt more comfortable owning jewellery and coins.
• Gold is not an “idle” asset. Gold in the form of jewellery could be worn. Most wives would also persuade their husbands
to convert bars, if held, into jewellery.
• Unlike Western countries, gold jewellery is still widely regarded as the best way to “invest” in gold for store of value and
savings purposes.
• In the early to mid-1990s, there had been more bar hoarding, but it had declined in recent years in most States due to
the static rupee gold price.
In the major metropolitan cities, the trade did report some private speculation in bars. There were large investors who
bought and sold TT bars (sometimes 100 or more), but this did not constitute bar hoarding. There appeared to be little
long-term accumulation. The number of speculators had also fallen since the mid to late 1990s.
Some trade entities, in the metropolitan cities, also commented that significant quantities of TT bars may be bought to
“park” underground funds, but in their view the bars were likely to be held for a short period before being used for other
purposes.
Some top end jewellery retailers, in Mumbai in particular, also observed that, although few TT bars were currently used to
pay for jewellery (apart from NRI’s who often brought back bars and coins for this purpose), they expected consumers to
accumulate more bars in the future. There was some evidence that this was starting to happen. It would be cheaper to
convert accumulated bars, rather than accumulated jewellery, into new jewellery for marriage purposes.
The trade made these observations in the context of a static rupee gold price between 1997 - 2001. Although the price had
risen since September 2001, they believed that the public were still wary about the direction of the gold price. Attitudes to
bar ownership might change but, in their view, most purchases in the future were more likely to be for short-term
speculative purposes, or accumulated for conversion into jewellery.
ABOVE GROUND STOCKS
Anecdotal evidence (at this time) suggests that bar hoarding as a proportion of India’s above ground stocks
of gold may be below 2%, i.e. below 240 tonnes.
The net annual increase in the above ground stock of TT and other bars appears to have been small in recent years.
The annual increase in the net amount of bars hoarded is difficult to resolve as some trade entities appear not to
differentiate clearly between the gross and net level of private bar purchases in any one year.
The on-going dishoarding of bars, originally bought for speculative or “money” purposes, or for conversion into jewellery
over time, appears not to be taken sufficiently into account.
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AN INTRODUCTION TO THE INDIAN GOLD MARKET