India has traditionally been the largest importer of gold in the world, and officially bans bullion exports. However, with deluded Indians believing that gold is over-priced (despite trading at a discount in India, at the moment), a Reuters article is reporting that India has actually become a net exporter of gold in the last couple of months.

That's right: the world's largest importer of gold has been exporting gold – and the price has still been going up.

With India's deep, cultural attachment to gold, no one believes that this trend will last, which begs the question: where will the price of gold go when India reverts back to its traditional role as a gold importer?

What makes this reversion even more inevitable is that scrap gold sales within India are not coming close to meeting demand – even at current, depressed levels. This means is that India is building up its own supply-deficit in gold.

In another piece I wrote several weeks ago, there was talk within India that there were hundreds of tons of gold in the ground, which India could mine – to help meet domestic demand. However, with this talk of “gold mining” in India still at the conceptual stage, it would be at least a decade before any significant amount of domestic production could offset the need for gold imports.

With inflationary pressures about to kick-in, which stimulates gold demand everywhere, we could be looking at a scenario where the traditional “spring sell-off” in gold is either very muted, or absent altogether.

Still completely missing from this gold bull-market is the “mania” phase – where everyone is buying gold, rather than just the 5% to 10% of the population who possess greater foresight.

As a “gold bug”, I can only salivate at the thought of what “gold fever” will do to the Indian gold market, after it has reduced the net holdings of gold in that nation for the first time in MANY years.

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