Case assignment

Question no 1: How is the Indian gold market different from rest of world?
Answer: Gold demand arose from 3 sources around the world:
 jewelry
 Industrial use and;
 Investment ( both government & retail)
In India, 62% of total demand contributed by jewelry, 37% retail investment and 1% for
industrial use. For the world, jewelry contributed 52% of gold demand, retail investment 39%
and remaining 9% for industrial use. Indian use gold more than other countries because Indian
use gold for their festivals, birthdays and weddings. The global physical demand for gold 34%
increased but in the India increased by more than 40% from 2004 to 2013.
Question no 2: What drives the demand for gold jewelry in India?
Answer: The gold jewelry market was driven by demand from developing countries that are
China (37%), India (26%), Turkey (4%), and Russia (2%). Both China and India together
contributed more than 63% of global jewelry demand. The U.S accounted 25% of the global
GDP that was responsible for only 3% of the global jewelry demand.
Question no 3: Is gold a good investment option?
Answer: Gold is good investment option because Indians considered gold a safe investment
option. In rural India, where the reach of banking system is limited, gold jewelry continued to
form a substantial part of people’s investments. Most of the Indian families borrowed against
gold for their short term financial needs. Gold return is higher than other investment options
especially in India. Return on bond and stocks are taxable but not on gold return. Gold prices are
always increasing and with them their return. So gold is good investment option for India.
Question no 4: If gold is, in fact lucrative investment option in the Indian market, why is the
dollar return so low?
Answer: Gold return changed into usually understood as a function of gold prices. After Bretton
wood system, gold prices were decided by means of the demand and supply of the gold. In India,
Gold demand for became very excessive. Due to which expenses have been high also, Price of
gold had been better than inflation in India for past 30 years. But in different countries, gold
demand for changed into lesser as compared to India as there had been many gold producing
countries specifically U.S. Due to less demand of gold and less gold prices there go back is low
as there also are different investment options in demand. In India growing gold fees were major
cause that it changed into lucrative alternative in India but no longer within the dollar.
Question no 5: Is the growing demand for gold a cause..?
Answer: According to me, demand for gold is a cause of concern for India. Indian currency is
backed through foreign Currency generally and small component is also backed by gold. If
People preserve importing gold in trade for foreign currency then Indian rupee will depreciate.
India will no longer be able to find the money for other imports as they'll boom because of
growth in Inflation. India isn't always Gold producing country and large is imported to fulfill
demand. Government is taking proper steps with the aid of increasing import duty however it
also must take different steps like spreading attention in people about different investment
options and put ban on a number of the customs which include in depth utilization of gold as it's
miles the major cause for Gold Demand. It also can ban jewelry absolutely and allow raw gold
with a view to make jewelry and fulfill their demand without paying more money and
additionally export it. It will also assist local industry and raw gold is cheaper than jewelry.