Indian Bullion market

Before dealing with the issue of Indian Bullion Market, we first need to understand the meaning of the word “Bullion” in economic terms. A renowned encyclopedia in the Internet defines bullion as a precious metal, primarily ' gold ' that can be cast into ' ingots ' or minted into ' coins '. The defining attribute of bullion is that it is valued by its mass and purity rather than by its face value as in the case of money. In short, the amount of bullion owned by a nation is precisely the intrinsic valuation of the amount of gold reserves that a country has. It is used as an indicator of the wealth possessed by a nation. Needless to say that the market is under the strict supervision of the Central Government.

Until 1990, the Gold Control Act prohibited its citizens from possessing gold bars. The investment in smuggled bars was also limited and was done before readily converting them into jewelery by the families that were financially sound when requirements arose at times of wedding or other social occasions.

However the scenario changed in the period post 90s when investment in small bars both imported and locally made that had proliferated from local refineries had increased substantially. During the mid 90s, Gold began to be used as a method of camouflaging wealth when the local rupee price had experienced a steady rise. Such an augmentation in investment in gold was uninterrupted in 1998 when over 40 tonnes of gold from bonds that were originally issued by the Reserve Bank of India (RBI) were restored back to the public.

Although in cities, gold is having to compete with investment in stock market, industries, and a wide range of durable consumer goods, the rural people till date prefer to invest in 22 carat jewelery.

In order to tap this hoarding of gold privately, the Government announced a new initiative in its budget for the year 99-2000. It allowed the commercial banks to take deposits in terms of gold bars,coins or jewelery against the payment of interest.

In present day context, the following statements hold true:

Gold is being valued in India as a secondary source of investment after bank deposits.
India is the largest investor in gold jewelery.
Domestic consumption is sensitive to monsoon, harvest and marriage seasons.
Indian jewelery off take is sensitive to price increases and more so to volatility.

Thus the Bullion Market in India even after undergoing several corrections has retained its status of being a recognizable index highlighting the economic growth of the nation in recent times.

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Keywords:

Bullion market, Indian Bullion market, Bullion, Indian jewelery, Gold Market, Gold, jewelery