World Gold Council

In News

• A report released by the World Gold Council (WGC) has identified inflation as the strongest factor influencing gold demand in India in the short term.
  • However, in the long term, income rather than inflation becomes the key driver of demand for gold. 

Gold & Economy Linkage

• Gold was used as the world reserve currency up through most of the 20th century. The United States used the gold standard until 1971.
• Hedge against inflation: The demand for gold increases during inflationary times due to its inherent value and limited supply. As it cannot be diluted, gold is able to retain value much better than other forms of currency.
• Affect on Currency: When a country imports more than it exports, the value of its currency will decline. On the other hand, the value of its currency will increase when a country is a net exporter. Thus, a country that exports gold or has access to gold reserves will see an increase in the strength of its currency when gold prices increase, since this increases the value of the country’s total exports.

Contribution of Yellow Metal in the Indian Economy

• Gems and jewellery industry: The gems and jewellery sector in India is one of the largest in the world and contributes to about 29 per cent of global consumption.
  • The industry contributes around 7 per cent of the country’s gross domestic product (GDP) and 15.71 per cent to India’s total merchandise exports.
  • Nearly 65 per cent of jewellery manufactured in India is handmade
• Gold mining: It provides significant sustainable socio-economic development to India. The gold mining industry has largely been insignificant in the country. About 45,000 ounces were mined in 2015.
  • At a country level, China was the largest producer in the world in 2016 (about 463.7 tonnes) and accounted for around 14 per cent of total global production.
• Gold refining: The refining sector has seen a sharp rise in new capacity in recent years. India’s total refining capacity is now above 1,450 tonnes.
• Impact on the current account deficit: India’s gold imports contribute to the second largest part of the import bill after oil.
• Exports: India is one of the largest exporters of gems and jewellery and the industry is considered to play a vital role in the economy as it contributes a major chunk to the total foreign reserves of the country. 
  • UAE, the US, Russia, Singapore, Hong Kong, Latin America, and China are the biggest importers of Indian jewellery.
• Unaccounted Gold: India has a stock of about 23,000-24,000 tonnes of gold which is mostly held by households.
  • India is the second-largest consumer of Gold and gold smuggling has been a perennial problem in India. 

About World Gold Council (WGC)

• It is a nonprofit association of the world’s leading gold producers.
• The WGC covers the markets which comprise about three-quarters of the world’s annual gold consumption.
• Headquartered in London,  they have offices in India, China, Singapore, Japan and the United States.
• It is a market development organization for the gold industry which includes 25
• members and many gold mining companies as well.
• The WGC was established to promote the use of and demand for gold through
• marketing, research and lobbying.

Source: LM