The Economic Downside to India’s Love of Gold
India’s love affair with gold stretches back for many generations.
And it’s not just alluring as a store of investment value. For Indian culture, the yellow metal is a sign of high status, affluence and prestige.
Simply put, the more gold you can wear and own, the better.
It’s why the country is the world’s biggest gold buyer, importing over 900 tons of gold each year. Much of it goes to its thriving jewelry industry, with the World Gold Council stating that Indian jewelry demand for gold totaled 567.4 tons in 2011, versus 366 tons worth of investment demand.
Now you might think that the furious gold bull market over the past few years – and the massive runup in prices – would have deterred Indian gold buyers.
Despite predictions of a flat year, if not a slowdown, India snapped up a record 969 tons of gold last year – a slight increase from 2010.