http://www.businesstimes.com.sg/bre...affair-gold-may-be-over-prices-slide-20140912
India's love affair with gold may be over, as prices slide
[VANGAL] Kiran Laxman Salunkhe used to buy jewellery during religious festivals, but sliding gold prices have led the young Indian farmer to break with his family's traditional investment.
This year Salunkhe has deposited his hard-earned savings at the bank for the first time in a decade and bought farmland. "I bought jewellery when gold price was 32,000 rupees (per 10 grams) last year. Now jewellers won't pay me more than 27,000 rupees if I want to sell. Why should I invest in gold," said Salunkhe, who farms 15 acres of sugar cane in Vangal, a village 250 km (160 miles) south of Mumbai. "Nowadays it is risky to keep jewellery. Burglaries are rising," he said. "With a fixed deposit there is no risk." A one-quarter drop in local gold prices over the past year has shaken the confidence of Indians in the precious metal as a store of value and dented demand in the world's second-biggest buyer.
The main beneficiary has been Indian stocks, which have been clocking up records on hopes that Prime Minister Narendra Modi can deliver on the promise of "better days" ahead that swept him to power in May's general election.
Beyond short-term sentiment, a major push by Modi for every household to get a bank account, better education and living standards, and falling inflation expectations, could herald a more secular change in investing habits. "The attachment of Indians to gold will remain," said Harish Galipelli, head of commodities and currencies at Inditrade Derivatives and Commodities Ltd, referring to gold's culturally embedded role in dowry gifts or decorating Hindu temples. "But as the banking network expands and literacy rises, people in rural areas will explore other investment products like mutual funds or bank deposits. The mindset is slowly changing." If the national obsession with gold does fade that would help curb India's external deficits - gold is the second biggest item on the import bill after oil - and cap world gold prices that are trading sideways in 2014.
