We love to buy gold because we believe that gold prices always keep increasing. To some extent, the reverse also holds true. Our immense appetite for the yellow metal is an important factor affecting gold prices. India has been the leading importer of gold, accounting for over 20% of the global demand. So, if India's demand for gold falls drastically, it does have some impact on the prices as well.

Our unabashed fondness for gold doesn't go down well with the policymakers. This is because India mainly relies on imports to meet its gold demand. And this in turn weighs down on India's current account. In the quarter ended September 2012, India's current account deficit stood tall at 5.4% of GDP. Moreover, it is said that in some months gold accounted for half of the deficit. As such, policymakers and the RBI have been finding ways to curb India's gold imports. Last year, the import duty on gold was increased to 4%. The Finance Minister is now suggesting that this be further increased to 6%. But critics say that this would increase the black market trade in gold.

Recently, creation of gold-backed financial products is under consideration. This would possibly help mobilise the huge unproductive stock of the yellow metal in the country. Overall, we think it is difficult to wean Indians off their thousands of years of love affair with gold.