We’ve reported recently on the attempts by the Indian government to curb gold demand to solve some of its economic issues. The Indian government has raised the import tax on both gold and silver multiple times this year. So has it worked?Apparently not.

India led the world in gold demand in the second quarter of 2013, according to the World Gold Council. In fact, the demand in India for gold in Q2 was the highest it’s been in the past decade. Jewelry, physical bars and gold coins led the demand growth. When looking at year over year numbers, demand for physical gold was up 70% in India this year over Q2 2012. Perhaps the Indian government needs to rethink its strategy, or just accept the fact that its country’s people love gold!

China has also seen an increase in gold demand and imports, and many experts have predicted China will overcome India as the world’s biggest gold consuming country.

In fact, when you combine China and India’s gold demand from Q2 2013, they accounted for 60% of the world’s total gold jewelry demand, and almost half of all gold bars and coins.

And people are really trying to say that gold is dead?!?! The low price for gold simply means that gold is on sale, and people in China and India are clearly catching on. This is a rare opportunity for gold investors to purchase the precious yellow metal at a discounted cost. But at this rate, China and India don’t seem interested in saving any for the rest of the world.

Another conclusion from these recent statistics is that despite efforts by the government, or poor economic conditions, the love trade does not tarnish. Interestingly, neither does gold. Indian culture incorporates gold into many celebrations: weddings, birthdays, festivals, and other holidays all have a gold component or tradition. This love of gold will not go away; people will not change culture and tradition to save a little bit of money.

Aside from love, fear may also be driving this demand growth in India. People are seeing the government’s tax hikes on gold imports, and assuming that the increases will only continue, so they are rushing to buy gold before it becomes even more expensive. They are also buying gold as a form of protection against a declining rupee.

The US is one of the leading countries in terms of gold demand, but is far outshined by India and China. Serious gold investors should consider the sense of urgency displayed by investors in these eastern countries.

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