From Kakani's report:
Till a decade and a half back, the difference between Indian gold price and international one was sizeable, thus encouraging Indians to buy their jewellery abroad. All the official gold imports were banned and the Indian jewellers got their raw material through smuggling channels, often well-established and very reliable. The mark up though was high, and was recovered from the consumers.In many cases even the resident Indians have often made their purchases from jewellery stores in Dubai, Hong Kong and Singapore, simply because the jewellers in India have been known to perform vast amount of under-caratage, whereas overseas stores supply guaranteed carats. This is done when many Indians travel abroad on holidays. The second means is to ask their non resident friends and relatives to fetch them jewellery while they visit their home country.
Reason enough why Dubai's famous Gold Souk, is not only full of stores owned by Indians, but also patronized by the vast Indian community settled in the Emirates and surrounding countries. Scores of shops cater exclusively to Indians, and proudly display Indian designs.
All these purchases are never recorded in official Indian imports, yet they happen to be a sizeable chunk. Almost 10 million Indians regularly stay abroad. Even if a most conservative estimate of five million non-resident Indians is to be taken into account as active purchasers, and even if each of them buys a very negligible 10 grams per year, the cumulative figure comes to 1.6 million ounces or 50 tonnes! At the current price of around $600 dollars per ounce, this amounts to more than $950 million.
During last one and a half decade Dubai Shopping Festival has become a happy hunting ground for Indian shoppers. Every year hundreds of thousands of Indians fly to the desert metropolis to do their shopping of electronics, fabrics, watches and, of course, gold. The amount of gold sold during these festivals is rising every year, and goes without mentioning, a lot of these purchases are made by Indians.
Apart from shopping festivals, more than one million Indians travel through Dubai International Airport, and many of them buy gold while passing through it. Dubai Airport in fact held the world record for selling maximum gold.
This additional fact about what drives the bull market of this decade sounds golden to my ears. Gold raced to a new quarter-century high of $667 in late trading.