A new set of proposals could lift gold demand in India. Developed as a “comprehensive” set of new guidelines, the proposals would allow consumers to use gold bullion in direct exchanges with banks – just like currency. Spot exchange pricing would become possible, allowing consumers and banks to have an exact value for gold at the time of the exchange.
This means gold would take on a legal tender role in the Indian economy, in addition to being a store of value and a base metal for jewelry and electronics. This is not expected to have much effect on demand immediately, but over time one could expect use of gold to rise, especially if inflation rose.