14 August 2012

Lessons on Gold from India

Gold for jewellery is usually separated from gold for investment when calculating the numbers on total gold consumption. However, large populations around the world view the two as synonymous. Excluding gold jewellery from investment demand is inaccurate, therefore, because there are many cultures where a gold necklace is considered, for all practical purposes, an investment.

This article contains the text of an interview with a woman who has lived in India her whole life, and gives a fascinating insight into how Indians view gold. Shanta, the interviewee, notes that in India gold is seen as the best way to preserve and invest wealth; it is viewed as a basic store of value; the middle class prefers to keep roughly 20% of their total wealth in gold; there is a trend toward buying coins and bars as well as jewellery; families view their gold as collateral and prefer not to sell it except in extreme cases; high prices are no enticement to sell; falling prices are of no consequence because families prefer to keep and add to their ounces.
Clearly, gold jewellery in India is more than a fancy adornment; it’s a store of value and preserver of wealth. It’s not even an investment; it’s more important than a rising brokerage statement. Indians aren’t wondering how good a gold bracelet will look on their wrist, but rather are seeing it as a vehicle for storing wealth.
There’s a lesson here for North Americans. Gold in any form is more than just a thing of beauty; it is a store of value. Given the race to the bottom amongst fiat currencies, gold is not just a potential moneymaker but protection against the coming inflation that will damage economy and dilute pocketbooks.

 (Shanta's relatives at a party. The nose piece is called a "Nath," and a "Tikka" is on the forehead. Both are worn by married women, though increasingly unmarried women wear them as well.)

I think there’s a lesson in this for us North Americans. How do you view the gold you own – is it a pretty coin, an investment, or a store of value? Given the obscene abuse most fiat currencies are undergoing, I think we’d be best served viewing it as not just a potential money maker but as protection against the rabid inflation that will damage our economy and dilute our pocketbooks.

  Vedran Vuk, Senior Analyst

Casey's Daily Dispatch Editor


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