How China’s recent Gold buying influence Indian Market?
SHANGHAI (Scrap Register): China added to its Gold reserves for the first time in two years. Data from the People’s Bank of China, the country’s central bank, showed that Gold reserves had increased to 59.56 million ounces by the end of 2018.
Higher buying by China will translate into an increase in Gold prices. This doesn’t predict too well for India, which imports Gold and accounts for roughly a quarter of global demand.
Costlier Gold will push up India’s import bill, and consequently the trade deficit, which is the difference between the country’s exports and imports. A wider deficit will weaken the rupee and make imports even pricier.
High Gold prices will also hurt Indian farmers, who mainly prefer to invest in Gold as opposed to other financial assets.
The increase in global prices of Gold could also cause the Reserve Bank of India (RBI) to temporarily hold off on its Gold-buying programme, despite having originally stated otherwise.