Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

India’s Love Affair with Gold

  by    0   0

We focus on India a lot. Why? Because Indians have a love affair with gold. It’s not just a luxury. Even the poor buy gold in India.

There are two main reasons to follow the Indian gold market closely. First, the country ranks second in the world in gold consumption. What happens in India can have a major impact on the world gold market. Second, the attitude of the Indian people can teach us a lot about the wisdom of buying and owning gold.

After a lull in demand last year, Indians have already purchased more gold this year than they did through all of 2016. We saw their passion for gold on vivid display when  Indians bought more 23 tons of gold in a single day during the Akshay Tritiya festival. But what drives it? Why do Indians seek gold?

A recent article at MoneyControl.com sheds some light on Indian attitudes about the yellow metal.

Sentiment, religion and customs ensure that most people keep their faith in gold. The birth of a child, or a marriage in the family, invariably translates into some purchase of gold. During gudi padva and dhan teras festivals the better-off purchase some gold, as it is considered auspicious. There are good economic reasons, too, behind the purchase of gold jewelery by rural folk. It remains the best hedge against inflation and can be easily mortgaged with any jeweler or pawn shop in exchange for urgently needed cash.”

Indians understand that gold tends to store value, and that in the end, gold is money. If they have gold, they know they will be able to get the goods and services they need – even in the event of an economic meltdown. And while westerners may not embrace the cultural and religious aspects of the Indian love affair with gold, the economic reasons for their devotion to the yellow metal are every bit as applicable in places like the US.

If you want to understand why Indians hold gold, just look back to earlier this year when the government launched a demonitization scheme.  The idea was to push Indians into putting their hoarded cash in the bank – thus bringing it “out of the shadows.” The demonetization policy resulted in severe cash shortages in some areas of the country.  Many Indians skirted the government scheme by using their black money to buy gold. When everything else collapsed, gold was there to save the day.

Indians value gold so highly, many are even willing to risk prison to get it. Gold smuggling is rampant in India. Officials estimate smugglers bring 100 tons of gold into the country every year.

And prices don’t seem to significantly impact Indian gold purchases. They even buy gold when the price is high. Weather actually has more of an impact on the Indian gold market than price.

The reason why people expect gold demand to surge is because there is a strong correlation between good rains, higher rural purchasing power and bigger purchases of gold. The price of gold has little to do with it. India suffered three years of drought until 2015. 2016 saw good rains, but then demonetization struck. This year, too, rains are likely to be good. The forecast is, therefore, for gold purchases to go up.”

When Indians have money to spend, they invest in gold.

We can learn a lot from the Indian love affair with gold. The people of India may live half a world away, but economics knows no borders.

WhyBuyGoldNowBanner.070815.590

Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Photo by 2il org via Flickr.


Related Posts

July Budget Deficit “Only” $63 Billion

The federal budget deficit for July was only $63 billion, according to the latest Monthly Treasury Statement issued by the Treasury Department. Of course, $63 billion is a huge budget shortfall. I say “only $63 billion” simply because it pales in comparison to the $864.1 billion deficit in June. In reality, the July deficit continues […]

READ MORE →

Status Report: Sound Money in the States

If you want to end unconstitutional, overreaching federal power – end the Fed. It’s the engine that drives the most powerful government in the history of the world. But Congress will never abolish the central bank. It can’t even come up with the will to audit the Fed. So what can we do? There are actually […]

READ MORE →

Central Banks Add More Gold in June

Central banks added another net 18.1 tons of gold to their reserves in June, according to the latest data from the World Gold Council. The net total was pulled down by a significant sell-off by Columbia’s central bank.

READ MORE →

ETF Gold Holdings Increase for Eighth Straight Month

ETFs globally added another 166 tons of gold in July. It was the eighth straight month of inflows of metal into gold-backed funds. That pushed total ETF gold holdings to another record high of 3,785 tons, according to the latest data from the World Gold Council. With gold hitting an all-time record high at the […]

READ MORE →

Silver Breaks Above $28 an Ounce

The price of silver broke above $28 an ounce Thursday morning. In the last 30 days, silver has gone up by nearly 54%. On the year, the white metal is up over 71%. Even with these big gains, silver remains historically undervalued compared to gold.

READ MORE →

Comments are closed.

Call Now