Bloomberg reports today that India’s gold imports may be cut dramatically this month, from about 75-80 tons same time last year, to 25-30 tons. This, as a result of higher import taxes which have slowed demand, and which were intended to slow demand as most gold purchased in India is imported.
Jewelry stores have closed down to protest these new taxes.
India is the world’s largest bullion buyer and consumer of gold, both in jewelry and bars and coins. It holds 32% of the global demand for gold. Half of it is bought as jewelry. In India, instead of banking on brick, like i recently wrote about Argentina, people bank on 22K gold. Instead of putting their rupees in a savings account in a bank, Indians buy gold. I have to say that in the last few years, this has been nothing to sneeze at. And as gold prices continued to climb, the Indian population, fueled by higher prices, keeps buying more.
Recently, there was a 60 minutes segment which explains Indian’s fascination with gold. You can watch it here: http://www.cbsnews.com/video/watch/?id=7398482n .
The gist of the news clip is that India’s fascination with gold dates back to ancient times, when traders took gold in exchange for spices and other exotic goods, and it is not going away any time soon. Gold is culturally ingrained in India, and a family that owns no gold is considered “an incomplete family”. No one there would ever dream of selling their gold holdings.
These days, in a nation of over 1.2 billion people, of which 400 million are considered among the poorest of the poorest, there are new programs to allow the poor to finance their purchases of gold, one little gram at a time. (Watching the news clip, I did not miss the irony of a lavish wedding in which about US $200,000 was invested in gold while cooks in the back room were preparing a sumptuous meal and earning about $2.00 a day)
Each year, during the last day of the Diwali Festival in the fall, on the day to honor the goddess Lakshmi, Indians take to the jewelry stores to buy gold, as it promises to bring wealth, health and prosperity, but only if you buy it on that day.
My favorite quote from the 60 minutes piece, is “when India sneezes, the gold industry will catch cold”. With Autumn a season of festivals and weddings, coupled with the Diwali Festival n November, gold demand should begin to perk up once more around that time. So if the gold market does catch a cold, it will give the world's largest consumer a better opportunity to add to their stockpiles at better prices.
For those who like pictures, I give you this, and await your comments with baited breath
When I visited India, I went to an area that had a temple covered in gold- yes, real gold. It was an incredible sight.
Though, I think that emerging markets' central banks will play more of a role in gold demand than consumers.
Interesting facts in the write up nonetheless.
^^ golden temple?
http://en.wikipedia.org/wiki/Harmandir_Sahib
some of you reading this may start wondering how much of it is still true. i mean most often western perspective of eastern culture takes an almost mythical tone. but, in this case, every bit of above article is true.
gold is deeply ingrained in the culture in the Indian subcontinent. people sell off lands, take loans against retirement funds, liquidate any asset that they can to buy gold during marriages. tax evaders replace bricks in water tanks with bricks of gold.
unlike the picture in the article most jewelry is stored in bank lockers (if its tax paid income), in private lockers built into concrete walls (if its illegal/tax evaded income).
the basis of this belief is that land and gold will NEVER lose their value. this was mostly true. indian economy was mostly isolated for most of 20th century.
of course the dealers, large jewelers and suppliers understand the global gold price fluctuations and macroeconomic impact. sadly, the retail consumer cares least. but then again, retail consumers don't buy all the gold that they consume at the same time. its purchased over a life time, often over generations. perhaps costs average out.
Even though dowry was banned, people still do it. Every family in India wants to marry into a higher social status, and I personally know one girl who couldn't get married because she couldn't afford the dowry people were asking for. And the family wasn't respected because they couldn't afford to get their daughter married, and if the daughter doesn't get married in her early to mid 20s, that's also bad for the family.
And they're right about weddings. People who attend the wedding don't come to see the bride & groom much. Like the clip said, it's a way to compare yourself to others to see where you stand. Plus, the bride & groom are off the market already so most of the time people are comparing themselves with others or they are "hunting" for a prospective bride or groom.
It's just our culture - we have always respected gold. Hindu mythology & stories about ancient kings & etc always have gold in them. Indians will never stop buying it. Haha
Btw, very nice picture selection! Although I'm not a big fan of the antique gold in the picture, I loved the sari & the movie! Haha You should check out the gold in Dubai! They had like an armor made out of gold - it was insane! I don't know why people would make the jewelry that big - not like the normal average person is gonna wear it..
very interesting post, thanks!
Indians are more fucked up than I thought. Nice post.
You're just learning that?
http://www.chinasmack.com/2010/pictures/filthy-india-photos-chinese-net…
You're just learning that?
http://www.chinasmack.com/2010/pictures/filthy-india-photos-chinese-net…]
Well in India atleast you are free to do whatever the fuck you want. The poor people can go anywhere and do whatever they want. And it's a 3rd world country. Whaddya expect?
Consequatur molestiae magnam corporis aliquam eos. Laborum nulla libero ut voluptatem autem eum molestiae ipsam. Id quae quas labore ut.
Velit atque voluptate dicta id et. Aut aliquid consequuntur quo eaque non. Quis quaerat optio dolore consectetur qui. Autem modi quaerat nihil animi. Libero ea eum blanditiis. Non non facilis illum ut recusandae.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...