Who holds world's largest stock of gold?

MUMBAI (Scrap Monster): Who holds the largest stock of gold globally? If you guessed SPDR Holdings, Central Banks around the world or the IMF, their holdings are wide off the mark compared to the 18,000 tonnes of gold lying in Indian households, according to World Gold Council.

Indians have traditionally seen gold as a preserver of value and wealth more so in rural areas where fewer people have bank accounts. Indians consumed 963.1 tonnes fo gold in 2010, gold purchases in India accounted for 32% of the global total in 2010.

WGC in its India: Heart of Gold report pointed out that the vast majority of the Indian population (70%) live in villages, which have traditionally formed the source of more than two thirds of Indian gold demand.

This sector has been growing at less than 1% per annum but is projected by Center for Monitoring of Indian Economy (CMIE) to grow in future at over 5% per annum, further fuelling gold demand

Mahesh Vyas, Managing Director & CEO of the CMIE, said: "Our macroeconomic forecast to 2020 shows India is poised for a very strong period of economic growth and this has significant, positive implications for all forms of gold purchasing in India."

"Our findings endorse the fundamental strength of the Indian gold market. We predict that new demand for gold will be driven by rapid GDP growth; urbanisation; the emergence of a strong middle class; and a sustained and potentially rising savings rate of 30-40% of income."

The studies highlight that, in India, categories of demand that can be observed in other markets are less distinct:

•The motivation for a jewellery purchase can be inextricably linked to value, wealth preservation and growth rather than pure adornment – there is therefore little distinction between investment and jewellery demand

•Gold is integral to all Indian wedding ceremonies: purchases relating to Indian weddings typically account for 50% of annual jewellery demand.

•With 50% of the Indian population under 25 and approximately 150 million weddings anticipated over the next decade, the World Gold Council estimates that wedding-related purchasing will drive approximately 500 tonnes a year

•A further 500 tonnes of existing gold will be gifted by one family to another

Mr Mitra added: "Furthermore, gold will remain auspicious given its connection with tradition, whether religious or attitudinal."

"Indians tend to be risk averse and place great faith in the wealth preservation qualities of gold, which inspires confidence, stability and security. Therefore, the view that Indian demand for gold will be driven by the concept of enduring value, not price."

A detailed historical and econometric study by Dr. Kannan finds that India's gold demand is influenced not only by the price of gold, but by macroeconomic, monetary and policy variables which include income, the interest rate, the exchange rate, personal income tax, government spending and wealth. This is further endorsed by proprietary research from the World Gold Council which shows that over the last five years, future gold purchase intent in India has remained demonstrably stable, in spite of rising gold prices during this period.