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Do Soaring Price and Mounting Demand in Indian Gold Market Speak of a Paradox?

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Do Soaring Price and Mounting Demand in Indian Gold Market Speak of a Paradox?
Do soaring price and mounting demand in Indian gold market speak of a paradox?

Submitted on: 30/07/2010 Case study

ABSTRACT
This case clearly and systematically explains the causes and effect of increasing demand of gold in India and helps to analyse the changes in demand curve.
Gold has always been a driving force in history. India is the largest gold consumer country accounting for 25% of the total demand of gold. Our aim is to analyse various determinant that operate demand. Generally, it is seen that festivals like Diwali, Akshaytritya and marriages increases the demand of gold.
This case present the condition where in 2008, people switched off their funds to gold as global economy was under recession. This condition increased the demand for gold and kept the price of gold relatively high as well. Hence, it presented the paradox to soaring price and mounting investment demand for gold. Whereas,this condition was not seen in the case of jewellery. The demand of gold jewellery started falling when the prices were high.

Tables and Figures For reference

TABLE 1 | | | Year | Price of gold | Quantity of gold demanded | 1991 | 8518 | 271 | 1992 | 9629 | 371 | 1993 | 11481 | 314 | 1994 | 12222 | 428 | 1995 | 12962 | 514 | 1996 | 13333 | 556 | 1997 | 12222 | 771 | 1998 | 12000 | 871 | 1999 | 12222 | 813 | 2000 | 12592 | 813 | 2001 | 13703 | 800 | 2002 | 15925 | 628 | 2003 | 17777 | 600 | 2004 | 19259 | 685 | 2005 | 20370 | 813 |

Study of demand in case of Gold

Overview
Demand is willingness to purchase. There are various factors which are considered for analysing the demand for a particular commodity.
These factors are known as Determinants of Demand. The factors are: 1. Price factor 2. Non Price factors

Demand is the function of price and non price factors. Qd= f( Price factor, non price factor)

Law of demand
The relationship between
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