Authorities in India are desperate to restrain the appetite of Indians for gold. From raising gold import taxes to barring loans against gold to now completely banning gold imports, the authorities are attempting to wean Indians away from gold.
Without much success, of course. Indians love gold. They’re positively infatuated with the metal.
From rural Indian housewives and the 27-year-old wannabe bride to those who generate black money, gold is not merely a store of value or an international currency -– it's part of a way of life, a showing-off of wealth, status, position, etc, besides its safe haven status in time of need. For centuries certain Indian festivals have been the time for splurging on gold. Festivals such as Akshay Trithiya and Dhanteras are considered auspicious times to buy the precious metal.
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Another story that I heard and liked was that gold was the metal of the gods, and when evil rises on earth, gold too must rise.
But while these stories have an ominous ring about them, gold has a positive side to it. Gold has been a symbol of prosperity for some time now. Gold is gifted to brides as it’s supposed to bring blessings and good luck. Gold is ingrained in the Indian psyche as the only precious metal every family must have, and as much as possible.
World over, gold has been the one of the oldest stores of value and empires were founded on and lost because of gold. This ancient currency has now been replaced by modern finance, and all the new-age economic theory that goes with it.
Proponents of modern finance dismiss gold as an archaic investment and a barbaric relic. Modern finance with its sophisticated tools is used to make savvy investments these days. But millions of Indians don't understand future cash-flows. They don't understand modern finance and how to invest like Buffett or others and make more money. They don't understand yields and much of the financial jargon.
They do understand that they have to buy gold and pass it on to their children. They do understand gold will have some value in dire times. They do understand that gold is a traditional unit of value and will always remain so. And so they will keep buying, even if it's just a little. The only thing that might keep Indians from gold is if the metal is abundantly available and if there's a prolonged slump in its price.
But given the way governments all over world are expanding balance sheets and depreciating their currency, and given that there's a limited supply of gold and unlimited supply of paper money which is debasing currency, the sage said the right thing to the maharaja and the praja. If something does go wrong, we will thank our sage. If not, we were supposed to do well economically anyway.