For a nation where gold investment and ownership matters so very much, politicians in India have gone awful quiet about its de facto ban on gold imports during the current national elections, writes Adrian Ash at BullionVault.

Finally ending in Varanasi on Monday after four weeks touring the country, India’s elections are widely expected to land Bharatiya Janata Party (BJP) leader, Narendra Modi the prime minister’s job. The gold and jewelry industry in India – former world No.1 consumer nation, but with barely an ounce of domestic mine output – last year sided with Modi, and Modi sided with the two-million or so gold industry workers. The incumbent Congress Party, in contrast, has faced down India’s deeply-rooted culture, history and savings habits to try and curb gold inflows, making a hot topic of the Current Account Deficit (CAD) and making enemies of the jewelry business and plenty of other voters meantime.

Victory for the BJP might therefore boost global gold prices. Or so you might think. However, there are three problems with guessing that a more gold-friendly administration in India will automatically mean gold rising.

First, the BJP’s manifesto makes no mention of gold. Not a word on bullion or jewelry either, despite previously saying the anti-import rules would be reviewed inside 3 months of taking power. Instead, the manifesto vows that the “CAD will be brought down aggressively, by focusing on exports and reducing the dependency on imports.” So far, so vague, and so what? Whatever Modi’s apparent support for ending India’s ban on gold imports, he’s never stated clearly how the BJP plans to address the issue. Any action on gold “should take into account the interests of the public and traders,” Modi is quoted today by BusinessWorld magazine, “not just economics and policy.” If ever a lobby group looked set for disappointment, this would be it.

The 10% import duty looks set to be trimmed anyway if Congress did somehow win re-election, if only as a way of claiming the anti-import policy is working and a little more gold can now be allowed. Instead the kicker remains India’s 80:20 rule, under which 20% of all new shipments must be re-exported before the rest can clear customs. Causing such confusion last summer that India’s monthly gold imports sank from record highs to zero, that rule was imposed by the independent Reserve Bank. So it’s not actually in government’s gift to repeal immediately. And like shaving the top off the high rate of duty, tweaking that ratio would now embed the policy, making it a more permanent part of India’s gold regulation.

Second, India hasn’t been short of gold anyway. “We see reports of gold smuggling reappearing,” as Modi said this January. “In the 1960s and 70s, when gold smuggling was big, it created the underworld, which troubles us even now.” India was still the world’s No.1 consumer before imports were deregulated in the early 1990s. Today’s heavy import duties offer fat margins to so-called “gray market” inflows and the gangsters who run them. So despite the anti-import rules, India’s private gold demand rose more than 12% to 975 tonnes last year, according to data compiled by market-development organization the World Gold Council. Its full-year 2013 Gold Demand Trends put India’s gold smuggling “closer to the top end” of 150-200 tonnes – a figure which would widen India’s official CAD by some 20% from the government’s earlier fiscal-year forecast of $45 billion, or even 25% if the newly revised $35bn forecast is to be believed.

Third, whatever happens to India’s gold policy in the coming weeks and months, it’s highly unlikely to boost prices either way because people who buy gold because it’s gold – led by Indian and Chinese households – don’t push gold higher. What counts for a bull market are not consumers, but people who buy gold because it isn’t anything else, meaning investors. Just look at 2013′s price action. Imports to India hit all-time highs last spring. Chinese demand was also off the charts. Yet prices were meantime falling at the fastest pace on record. Anyone scratching their head needs simply to swap the horse and cart around to see how this rolled forwards, with Western money managers reducing their gold holdings to buy the equities, credit and real-estate exposure they’d fled five years before.

By the time India slammed the shutters with the 80:20 rule in July, gold had already completed its 30% drop for 2013. The back-half of last year saw dollar prices go sideways even as the subcontinent’s legal, visible demand vanished. Its return would by no means suggest a strong rise from current levels.

The root cause of India’s huge gold demand meanwhile remains unaddressed. According to Modi’s rhetoric, some Congress Party leaders think it stems from financial ignorance and ill-education amongst the rural poor. Certainly they have cast buying gold as anti-social, a waste of resources in a “useless” asset which should be put to public use instead. But in truth, people choose to buy gold with their own money when that money loses value, and for Indian households, that’s been the case pretty much every year since WWII.

Like the US Fed or Bank of England at the start of the 1980s then, the Reserve Bank of India could curb all gold demand – legal and gray – overnight if it wished. But strong real rates of interest aren’t politically popular anywhere here in 2014. So Western traders and investors watching the heaviest buyers for some kind of direction might expect the floor which Indian, Chinese and Western retail demand put beneath gold prices last year to stay firm in 2014.

No, India’s gold buyers didn’t spur a surge in prices. But they plainly like a bargain in gold, and they have – over the last 14 years – stepped up their demand at ever-higher prices both in dollar and rupee terms.