The gold fever that has hit India now is not a new fad. Collecting (or hoarding, rather) gold is a national hobby that has now affected members of the lower levels of society such as the middle and lower classes. On the contrary, the rich have diversified their investments to include mutual funds, stocks, bonds and even abstract art pieces. Personally, this is a very smart move, for the domination of one’s wealth in one specific commodity is very high-risk, and these rich Indians, unlike their less-wealthy countrymen have in fact decreased their gold consumption.
Buying gold is perhaps a very reasonable way to store one’s wealth in India, as compared to depositing money in private banks. Although banks in Singapore have never winded up, banks in India have, and banks declaring bankruptcy is not a rare occurrence at all. Hence the trust of many Indians in gold. However, this situation is doing nothing to aid in the entire country’s development at all, as the stagnant savings in the form of gold sitting in banks and private safes are not being utilised in investments such as stocks and in banks. Thus I cannot blame many Indians for not wanting to grow their money, for there is a risk with stocks which can fail overnight and banks which can collapse without any indication.
Yet ironically this number of people safekeeping their wealth in gold may be falling too. Under the IMF, the gold standard was initially set at a value of $35.00 per troy ounce in 1934, but however, this amount has inflated many more times, and current gold prices as of January 6 stands at $541.20 per troy ounce. Even so, the demand for gold is not likely to drop any significantly. This is so, as gold is the quintessential adornment in Indians weddings. Indians are willing to land into a state of debt so as to procure the gold they need for their weddings. Necklaces, bracelets, bangles and earrings are what the bride will be equipped with, and it is the only acceptable way that has become to be generations. It is also a way to assert your status, that one with gold is someone to be respected in society.
In the past, the price of gold has been a few hundred rupees for a sovereign (one sovereign is eight grams), but now it has surged to six thousand rupees for a sovereign. One peculiar thing to note though, is that it is more likely that less people could afford the gold in the past than in the present times. Not that people have all become rich, but generally more affluent nowadays such that the line dividing the lower and middle classes is getting broken up.
Though buying gold seems like a very unwise decision in the long-term, jewellers in India can expect to reap annual harvests when the wedding season comes in, at least. Gold is a necessity, which Indians cannot do without. It is unlikely that this will change even in time to come.
-7:57 PM-
IDIOT.