Indians and Gold – Old Deal, New Equations
The Indian love affair with gold is the stuff of legends.
In 2019, the World Gold Council (WGC)
In gold, we have confidence: Indian household gold reserves are valued at more than 40% of GDP
that Indian households had stored up to 25,000 tons of gold, making the country the largest gold holder in the world. For perspective, the value of that $1.1 trillion gold was then equivalent to more than 40% of India’s Gross Domestic Product (GDP).
The volume and value of this treasure has only increased since. Indians made up for lower imports and demand in 2020 the following year, according to WGC data. Gold prices have also spiked during the pandemic; it went from about 32,000 rupees ($410) for 10 grams in May 2019 at a peak of 56,000 rupees ($720) in August 2020. Currently, it is trading close to 50,000 rupees ($645).
For many during the pandemic, the metal was a lifeline, pledged as it was for loans. Even the country’s central bank, the Reserve Bank of India,
The Indian Express
As REIT outflows hit FX reserves, RBI stepped up gold buying
its gold holdings, adding 16.58 tons to over 760 tons in the six months to March 2022.
As the enduring engagement between Indians and gold continues, the equation between the two has changed. Because the pot of gold that India is sitting on might just turn out to be the leprechaun’s.
India is the world’s second largest consumer of gold after China, but it also imports most of its requirements. With the price of the rupee steadily depreciating – Rs 77.64 to $1 at the time of writing – this sticks India with a fairly large foreign exchange bill.
Unsurprisingly, successive governments have tried to steer Indians away from physical gold.
In 2013, P Chidambaram, then India’s finance minister,
Don’t buy gold, P Chidambaram urges citizens
citizens to curb their appetite for gold and increased import duties. And in 2015, a year after a new government was sworn in, India introduced sovereign gold bonds (SGBs) – suspended paper gold as an investment option, with a nominal interest rate added. as a sweetener.