Will gold price crash in India?

Is the price of gold, which has hit an all-time high, set for a crash?
On Tuesday, bear fever gripped the gold market as traders and dealers
said that they are expecting a crash in the prices of gold in the
Indian bullion market.

Gold had hit an all-time high of Rs 11,492 on the Multi Commodity
Exchange, the largest commodity bourse. The gold contract has gone up
more than 7 per cent so far in 2008.

Traders said the demand for gold is dull, as many people are
expecting that the prices will come down.

Overseas gold touched an all-time high of $914 an ounce on Monday on
investor buying driven by the dollar's slide and financial market

Bombay Bullion Association said that India's imports of gold in
calendar year 2007 could have fallen by 20 percent due to a surge in
prices. In 2006, India, the world's largest consumer of the precious
metal, imported about 715 tonnes of gold.

The country consumes anywhere between 600 to 700 tonnes of gold worth
$6-7 billion annually. But domestic production of gold is only about 2
tonnes per annum. The consultancy said the net gold de-hedging in the
second half of 2007 will be between 1.5 million and 2.5 million oz

And, who usurps all this gold in India. Mainly the gems and jewellery
industry, which is competitive in the world market due to its low cost
of production and availability of skilled labour. In addition, the
industry has a worldwide distribution network, which has been
established over a period of time.

The strengthening of rupee against US dollar and rising consumer
spending have raised India's gold demand by as much as 72 per cent in
the first half of the last year. A report from the World Gold Council
says demand for gold in India reached an all-time high of 317 tonnes
in the second quarter of 2007. The figures are nearly double of what
was sold in 2006 and equal to half the global mined output for the
same period. Of this, only 10-15 per cent was recycled gold,
indicating strong demand for fresh imports.

Latest reports say India has emerged as the fourth-largest merchandise
gold export market for Australia in 2006-07. Gold exports comprise
nearly half of all merchandise exports to India from Australia, says a
report from the Australia India Business Council. It said in 2006-07
India was Australia's largest market for gold, second-largest market
for coal and copper ore, and third-largest market for wool. Australia
has also agreed to allow the export of uranium to India, subject to
strict conditions. Australian exports to India rose 37 per cent in
2006-07 as against 22 per cent in 2005-06. Last year, merchandise
exports from Australia to India were worth AU$10.1 billion, up AU$2.7