David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

In times of trouble for gold -- and the yellow metal has slid 11 percent over the past six weeks -- India has traditionally provided a safety net.

The country's consumers typically account for between a fifth and a quarter of total global gold demand in the second half of the year, with bargain-hunting buyers putting a floor under prices when they fall too far. That's particularly so in the period starting November, when most Hindu weddings take place.

The precipitous drop in prices over the past two months has led to hope the usual rules didn't apply this year. After all, the government of Prime Minister Narendra Modi started a shock demonetization drive Nov. 8, removing 500- and 1,000-rupee notes from circulation.

That's dried up the deep well of cash that would traditionally be used to buy gold, especially for rural dwellers, which account for about half of the nation's demand and transact almost entirely in cash. Anecdotal evidence suggests business is indeed weak: Sales of diamonds and emeralds suffered, while jewelers reported foot traffic just 10 percent of usual.

If demonetization was hurting Indian gold demand at a time when it's normally strong, that might help explain the savagery of the price fall. Unfortunately for bulls, the opposite seems to have happened. Gold consumption didn't weaken, or even hold steady in November. It boomed.

Glitter Bomb
The value of India's gold imports surged to a 15-month high in November
Source: Reserve Bank of India

The value of imports reached $4.36 billion during the month, a 23 percent increase on a year earlier and a 25 percent jump from October, according to data released by the Reserve Bank of India last week. At average spot prices, that would translate into about 3.5 million ounces, or 110 metric tons -- more than the reserve holdings of South Korea's central bank.

Such import levels -- the strongest in 15 months, based on dollar value -- aren't unprecedented, but they're strong enough to challenge the view that India has been a drag on gold over the past month.

Bound to Return
Gold prices in Mumbai have fallen back to levels at which locals start buying again
Source: Bloomberg

The figures provide more support to anecdotes immediately after Modi's announcement, suggesting the rush to convert expiring banknotes into alternative assets was helping rather than hindering gold demand. Such buying may not have ended when the old notes ceased to be legal tender on Nov. 8, either: During the month, 27 billion rupees ($398 million) of gold was bought with illegal demonetized notes in Hyderabad alone, the Times of India reported Sunday.

India's love affair with gold may yet provide support to prices, particularly as the recent falls have driven the metal below the 30,000 rupee-per-10-gram level where local buyers come back to the market. But anyone hoping that wedding season might provide the cavalry to rescue the yellow metal from its current predicament may find themselves disappointed.

Coming Up Short
Investment funds' net long positions in Comex gold futures and options are dropping like a stone
Source: Bloomberg

Right now, investment funds spooked by the prospect of higher interest rates are selling faster than Indian consumers are buying. Until that dynamic levels out, gold's road will be rocky.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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David Fickling in Sydney at

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Katrina Nicholas at