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

Not Just a Luxury; Even the Poor in India Buy Gold

  by    0   0

While you may think of gold as a luxury item, many Indians view it as a necessity. In the Asian nation, buying gold is not just for the rich. In fact, a recent survey shows that possessing the yellow metal is a universal phenomenon across all income classes in India.

The yellow metal is interwoven into the country’s marriage ceremonies and cultural rites. Indians also value gold as a store of wealth, especially in poor rural regions. Two-thirds of India’s gold demand comes from these areas, where the vast majority of people live outside the official tax system. This explains why even the poor buy gold in India.

According to the ICE 360 survey, one in every two households in India purchased gold within the last five years. Overall, 87% of households in the country own some amount of the yellow metal. Even households at the lowest income levels in India own some gold. According to the survey, more than 75% of families in the bottom 10% had managed to buy gold.

If anything, these numbers likely understate gold ownership – especially among the poor. An official involved in the survey who did not want to be identified told LiveMint that survey respondents are often hesitant to admit to purchasing gold. This comes as no surprise considering gold is a major part of India’s vast underground economy.

Many analysts think gold will be pushed even deeper underground with the implementation of a new tax. On July 1, the Goods and Services Tax (GST) on gold  jumped to 3%, more than doubling from 1.2%. According to a Reuters report, this won’t likely dull the country’s appetite for gold, but it will push more of it into the darkness of the underground economy.

A hike in taxes on gold sales in India could stoke under-the-counter buying and drive up appetite for precious metal smuggled into the country, where millions of people store big chunks of their wealth in bullion and jewelry.

Some government officials wanted a much higher tax on gold. Chief economic adviser to the finance ministry Arvind Subramanian pushed for an 18% tax to bring gold in line with other luxury items. But for many poor Indians, the metal is not a luxury. It plays a vital role in their economic well-being. As the LiveMint report highlighted, the gold serves as an important insurance policy for many Indians, giving them the option to borrow against the metal during hard times.

The poorer income classes take gold loans mostly for medical emergencies or financial crises. As the chart below shows, the proportion of households availing gold loans because of such reasons is much higher among the poorer four deciles (bottom 40% of the income distribution) than among the richer income classes. This suggests that in the absence of adequate insurance or financial savings, gold holdings work as insurance for the poor, even in 21st century India. And given a chance, most of them would like to have more of such insurance, the data shows.”

It’s telling that the poorest people in a relatively poor country still manage to buy gold. It goes to show anybody can own gold if they simply make it a priority.

Basic economics aren’t any different in India than they are in the US or any other country. Gold is still money. It historically serves as a hedge against inflation and a safe-haven in times of economic distress. Many Americans understand this, but they feel like they just can’t afford to invest in gold. But if a poor Indian farmer can find a way to buy gold, why can’t we?

TaxFreeGold.Banner.1000x285

Get Peter Schiff’s latest gold market analysis – click here for a free subscription to his exclusive monthly Gold Videocast.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

Peter Schiff: The Fed Is Behind the Curve; Financial Conditions at Loosest Level Since 1994

According to data compiled by the Chicago Fed, financial conditions have reached the loosest level in the US since January 1994. This despite Federal Reserve tightening over the last year. On Nov. 10, the Chicago Fed National Financial Conditions index hit -0.93. As Peter Schiff pointed out in his most recent podcast, that was early […]

READ MORE →

Geopolitical Risk: The New Normal

Over the last year, we’ve talked a lot about geopolitical risk. Could turmoil around the world now be the new normal? Some analysts think so. Related

READ MORE →

Is a December Rate Hike Necessarily Bad News for Gold?

Fed Up FridayConventional wisdom holds that an interest rate hike in December will be bad for gold. But will it? There is actually evidence the opposite could be true. Related

READ MORE →

Another Step Forward for Sound Money: Location Picked for Texas Gold Depository

The Texas Bullion Depository took a step closer becoming operational earlier this month when officials announced the location of the new facility. The creation of a state bullion depository in Texas represents a power shift away from the federal government to the state, and it provides a blueprint that could ultimately end the Federal Reserve’s […]

READ MORE →

Thompson Reuters GFMS Outlook: Gold Above $1,400 in 2018

Analysts at Thomson Reuters expect the price of gold to push back over $1,300 and then continue to rise above $1,400 through next year, primarily driven by overvalued stock markets, according to the GFMS Gold Survey 2017 Q3 Update and Outlook. Related

READ MORE →

Comments are closed.

Free Newsletter & Notification of Special Deals
RSS Feed
LINKEDIN
YouTube Channel
YouTube Channel
Google+
Google+
https://schiffgold.com/key-gold-news/not-just-luxury-even-poor-india-buy-gold
Call Now