India imported gold worth $56 billion and the current account deficit is $74 billion so in order to enclose the deficit government might have to introduce tax for gold imports. This might shoot up the price of gold for short term but in the long term it would reduce the demand for gold. The magnitude of easing by the developed nations might increase the risk enthusiasm of the global investors.

The investors who borrow at a low interest rate from one country and invest for a higher interest rate in the other country, picks up. The Indian markets may see inflow of funds because of the attractive equity valuations and this may also increase the demand for rupee against the dollar. Thus quantitative easing will have a balancing effect on the gold prices. On one hand it may increase the dollar prices of other precious metals and on the other hand it may decrease the rupee prices. 

In the global economy, the international macroeconomic events are the principal drivers of gold prices in terms of dollar. Nevgi says, “Gold prices are expected to go up in dollar terms due to the sovereign debt crisis in Europe and a possible quantitative easing.” The conjecture of the Greece’s exit has been one reason for driving the demand of gold.

If economies like Spain received a default in re-payment of its borrowings, so if the investors buy gold in large quantities, the stability of the Euro as a currency may be inquired. The increasing gold demand is the result of the worsening sovereign debt crisis.