Why are Indians in the grip of a gold obsession?
Why are Indians in the grip of a gold obsession? by Vivek Kaul for LiveMint
- Between April and November, India imported 533,376kg of gold, around 20.3% less than 669,339kg imported during the same period in 2018
- Like in Aceh, India also has a very strong informal system of exchange where gold can be rapidly turned into cash, especially in times of emergency
The price of gold crossed ₹40,000 per 10g last week. Since the beginning of this fiscal, gold prices have surged by around 25%, driving down gold imports by a fifth during the same period. Mint takes a look at India’s love for gold.
By how much have gold imports reduced?
Between April and November, India imported 533,376kg of gold, around 20.3% less than 669,339kg imported during the same period in 2018. This is hardly surprising since gold has turned costlier this fiscal. Between April and November, the average price of gold was ₹35,337 per 10g, against ₹30,689 during the same period a year ago. Since November, prices have rallied higher due to Iran-US tensions. Over and above this, the easy money policy of the US Federal Reserve has made a comeback. The Fed has resumed printing money in order to drive down interest rates. This has pushed up gold prices as well.
What explains the love Indians have for gold?
Since very little gold is produced in India, almost all of the metal consumed is imported. Over the years, Indians have continued to love gold. In FY19, India imported 983,000kg of gold, the highest since FY14. A major reason for our love for gold remains tradition. But there is more to it than just that. As Richard Davies writes in Extreme Economies, “Gold also acts as a kind of informal insurance mechanism.” He writes this in the context of Aceh, a semi-autonomous province of Indonesia, and how survivors of the 2004 Asian tsunami rebuilt their lives using the gold they had on their bodies.