Gold imports and gold consumption have taken a beating post-demonetisation as a significant portion of the business is done in cash. Gold and jewellery are widely used as a channel for unaccounted money and with demonetisation and shortage of cash, jewellers have seen their business down by almost 30 per cent. Rural buyers too have been scarce this year as farmers have not been paid for their crops due to the cash crunch. 2017 does not seem to be a good year for gold. Gold prices are expected to go down to Rs 25,500 per 10 gm from the present Rs 27,000 per 10 gm because of the strengthening dollar during the Donald Trump presidency.
The dollar has already strengthened after his victory. Traders expect Mr Trump’s policies to lead to the strengthening of the dollar and the US economy. There is a symbiotic relationship between gold and dollar, as gold acts as a safe haven when the dollar is down. For the present demonetisation was the last straw for gold which had seen low consumption in 2016 as it had been giving low returns. It had picked up during the October-November festive and wedding season, but after November 8 it is expected to take a hit. Government’s various duties to bring down gold imports had led to gold getting expensive. India usually imports around 850 tonnes of gold annually, the biggest importer along with China. But according to traders this is expected to come down by 300 tonnes because of low demand. Some of the gold is smuggled and it is this smuggled gold also which is sold in cash.
