India is known as the biggest consumer of gold in the world, much of it sold in the form of investment-grade jewelry (with high caratage and low design premiums). Privately possessed gold in Indian is estimated at 15,000 tonnes. But with gold prices high many Indians are rushing to sell their gold, seeing this as an opportunity to profit before gold prices drop again. Current gold prices in India are 15,790 rupees per 10 grams (US $317.70)
India normally imports 90% of the gold supply needed to meet demand. But now as Indians become net-sellers of gold, imports have fallen off. In January just 1.8 tonnes of gold were imported, compared with 14 tonnes in January of 2008. So far, no gold whatsoever has been imported this month (February 2009). This follows the general downward trend of 2008, during which only 660 tonnes were imported, compared to the usual 700-800 tonnes.
The beginning of the year is wedding season in India, a time of giving gifts of gold. People are still buying, but are not increasing their budgets. They are simply settling for less gold within their budget. And with all the selling going on, local supply can meet all of the demand for wedding gold without any imports.
Many Indians perceive the current prices as the gold market's peak and are selling their gold with the intention of buying it back soon when the prices drop. But even then Indians have become net-sellers, the rest of the world are now becoming buyers of gold, a trend which will probably continue for quite a long time throughout this current financial storm.