Prices of gold biscuit shot up by Rs 3,800 last year and touched Rs 53,200 per ten tola on December 29 against Rs 49,400 on last day of 1998.Similarly, standard mint gold and 22 carat prices also jumped up by Rs 335 and Rs 310 and quoted higher at Rs 4,550 (Rs. 4215 on December 30, 1998) and Rs 4,210 (Rs 3,900) per ten gm respectively.

Silver .999 and raw values also shot up by Rs 660 and Rs 615 during this year and touched Rs 8160 and Rs 8000 per kg respectively.

The Bombay Bullion Association (BBA) president Mukulbhai Sonawala said import duty on gold was raised twice during the year. First from Rs 200 to Rs 250 per ten gm during the budget for 1999-2000 and then to Rs 400 per ten gm from January. With the duty hike, Indian consumers are paying 9.5 per cent more than the international price compared to 6.5 per cent before the hike.

The step seems to have been taken under pressure from various quarters to arrest inflow of gold under the open general license (OGL) but the move had also resulted in a rise in smuggling of gold.

It is no surprise then that one of the nominated banks allowed to import gold under OGL has decided to pull out of the gold import business from April this year.

Sonawala further stated that more and more central banks all over the world have started selling their gold reserves.The resultant gold price crash has signalled the effective end of the yellow metals's role as reserve currency.Even IMF has decided to sell part of its gold reserves (300 tonnes) for raising funds to help the heavily indebted poor countries. The formation of European central bank is also likely to release about 12,000 tonnes of gold from the member countries.

Gold prices have already crashed below 260 dollars per ounce level and if the prices fall below 250 dollars, a number of mines will be pulling down their shutters. Some have already done so.

Gold performance in 1998 can only be described as ``disappointing.'' the average price of 294 dollars per ounce was lowest since 1978 and in real terms, gold is now back to where it was in 1972.

Last year the turmoil in the financial market might have been expected to reverse the downtrend. A full blown emerging market crisis, a record one day fall in Dow Jones and the sudden decline in the US dollar that resulted in the collapse of large hedge fund (LTCM) all this combination of events placed the financial system under tremendous pressure.

There is no let- up in the love for the yellow metal. According to the latest calculations by the World Gold Council (WGC), the world gold demand in the third quarter of last year in 27 principal markets reached 876.5 tonnes, a new high for any quarter period.

This figure was 22 per cent up from 721.2 tonnes in the same quarter of 1998 and eight per cent from the previous peak of 808.4 tonnes set in the second quarter of this year.

In the Indian subcontinent, gold demand in India at 241 tonnes in the third quarter was 38 per cent more than the 174.1 tonnes in the same period of last year and the second highest quarterly demand ever recorded.

This figure was exceeded only in the first quarter of 1998 when demand was exceptionally high at 254.2 tonnes following the easing of import restrictions at the end of 1997.

Total Indian gold in the nine months of this year has thus increased to 658.9 tonnes showing four per cent increase over 633.2 tonnes in the same period last year.It was also a record for nine-month period.

The huge surge in Indian gold demand was particularly noticeable in August as official imports soared with designated banks taking advantage of the gold price ruling at 20 years lows.This offset the effect of the local price premium reaching 12 per cent over the international price.

Indian official gold imports continued to surge forward on a quarterly basis, having amounted to 175.9 tonnes in the third quarter from 171.9 tonnes in the second quarter and 130.9 tonnes in the first quarter last year. Aggregate imports for the nine months amounted to 478.9 tonnes against 481.80 tonnes. BBA president Sonawala stated the State Bank of India's gold deposit scheme was finally launched in New Delhi on November 19,1999. Gold scheme will have maturity of three to seven years.The three- year deposits will carry an interest rate of three per cent, four years 3.25 per cent, five years 3.75 per cent, six year 3.75 per cent and seven years four per cent.

Interest will be paid in cash, according to SBI chairman GG Vaidya.The scheme, meant to mobilise idle domestic gold for economic use, will be operated through SBI's 50 branches all over India. Similarly other banks are operating these gold deposit scheme, which are receiving modest response from Indian investors.

The gold deposit scheme can be total success only if amnesty is provided against deposits, according to former president of BBA, ML DamaniDamani said that voluntary disclosure of income scheme (VDIS), launched by the former finance Minister P Chidambaram, was a success because amnesty was provided in the scheme.

Damani and Sonawal, however, welcomed the recent notification of GDS as certain other incentives mentioned in the scheme will encourage depositors. They stated that Reserve Bank of India (RBI) should announce a higher interest rate to encourage depositors.

Sonawal lauded government's efforts in the present situation to lessen the amount of gold imports by attempting to mobilise idle gold through GDS. He said huge imports of gold in recent times have caused a considerable drainage of foreign exchange. The demand for gold in the country is on upwing with the growth in population rate and rising income of the people.

Sonawal further stated that demand for silver in India continues to be strong following a rebound seen during 1998 and should rise 7.8 per cent to 125.8 million ounce (MOZ).Of this, total demand jewellery and silverware offtake is expected to rise 8.9 per cent to 90.5 MOZ, while industrial use could absorb 35.3 moz.

Indian silver demand is running high ahead of last year despite slack months of July and August and large arrivals of hoarded stocks owing to political uncertainty at that time. Farmers demand for silver was rather low owing to their inability to turn surplus grains into cash as neither government nor traders were interested in buying the same.

The Indian silver market saw steady arrivals of Chinese origin metal in August, but the quality was not good as the metal seemed to be old scrap of fabricated articles. Yet it commanded occasionally a premium on prices vis-a-vis primary silver owing to the latter's tight supply.

Indian silver demand could rise further in 2000 as more stable economic and political conditions now prevail, but demand could be restricted to some extent by rising prices, Sonawala pointed out.

Silver .999 variety recorded lowest and highest during last year at Rs 7,600 per kg on March 19 and Rs 8,600 per kg on September 29, 1999 respectively.While gold biscuit touched lowest at Rs 46,900 per ten tola on July 4, 1999 and highest at Rs 57,800 per on October 14. Similarly standard mint (24 carat) also quoted a bottom at Rs 3995 per ten gm on July 21 and peak at Rs 4910 on October 14.