The Reserve Bank of India (RBI) seeks to lessen the Indian deficit by reducing the physical gold purchase. These actions weren’t seen in India since 1990.
The RBI squeezed gold bank loans, restricting them all except for financing gold jewelry exports.
The new Indian strategy is to manufacture gold, and re-export it rather than consuming it locally. This may reduce the current deficit in the Indian balance sheet.
Backed up the recent raise in gold premiums and taxes, the physical demand from India is starting to slow down, and might shrink to the desirable level by the Indian government.
The local demand on gold may not act as the Indian government wishes, especially with current rate of corruption and low prices of gold since mid-April.
There is another alternative for the Indian lust for gold; gold ETFs and gold companies’ shares. Although they might not feed the Indian need for physical gold, it may be a good investment for their lower costs and share-like features.