Posted on 26 July 2012.
Americans and Indians have many distinct cultural differences and the gold market in India is an obvious one. Americans believe that currency is the status symbol; they would rather have a million dollars in the bank or in investments than gold bars sitting in a vault at home. Indian culture is quite different; they do not trust the bank structure and so believe that gold is the ultimate symbol of wealth. India only produced two tons of gold in 2011; this is compared to the country importing over 1,000 tons that year.
The massive flow of Indian Rupees out of the country caused the Indian Government to panic and pass several new laws and taxes; these changes were all targeted at making it more expensive to import gold and put more money into the pockets of the Government. Increasing import duties and adding a general tax to all gold jewelry sales has outraged the Indian people. To put this a bit in perspective, Fort Knox has about 9,000 tons of gold housed in its vaults; the Indian public has more than double that spread amongst the population. The gold market in India is now suffering due to these taxes and the community has instituted a strike of sorts in response to the hefty taxes.
The gold market in India caused a global depreciation in the value of gold; a lot of investors found that without the hefty demand from India their gold began to plummet in value. Savvy investors know that strikes like these will not last forever.
The Indian people still want gold and will be itching to be able to buy up all they can once the strike is lifted. The smart investor is going to be buying up the gold while the price plummets; they will then patiently wait for the strike to be lifted and watch the profits flow in while the value of gold skyrockets. The gold market in India is a perfect example of how governments and politics can have a drastic impact on the stock exchange.
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