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Finance • Investing

Why Indians Buy Gold

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Gold holds enormous cultural significance across the globe, being used for jewelry and worldwide trade. But, one nation stands out for having a special relationship with this precious metal. Here we will discuss why Indians buy gold and what lessons we can learn.

According to the World Gold Council report of January 2023, India is the world’s second-largest consumer nation of gold. The Gold Reserves in India increased to 794.62 tonnes in the first quarter of 2023. 

With gold prices likely to hit a record high of $2,000 per ounce in the coming months and central banks buying up the precious metal in record numbers, many investors are weighing up the advantages and disadvantages of gold investment.

Best Second Citizenships for Indians and South Asians


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Cultural Significance of Gold

Despite the fact that roughly 6.7% of Indians live below the poverty line, most will still find the means to buy gold in some form. This demonstrates the importance of gold in Indian culture. 

Spiritual Importance

Gold has been deeply ingrained in various aspects of Indian culture and society for centuries, mainly because gold in India is considered sacred. Five major faiths are practiced in India, all using gold in some form of worship, ritual, or dress. 

Gold is closely associated with several deities, rituals, and sacred ceremonies. In many faiths, it is believed to be the metal of the gods and symbolizes purity, divinity, and eternal wealth. Gold jewelry is also often worn during religious festivities and ceremonies to invoke blessings and seek divine protection.

Generational Wealth

Gold is not only regarded as a symbol of wealth but also a means by which many Indian families pass down wealth through the generations. 

Owning gold items, particularly jewelry, is seen as a mark of financial stability and security. These family heirlooms are passed down from generation to generation, not just because of their sentimental value but because Indians, whether wealthy or not, understand that gold is a form of investment, savings, and insurance all in one. 

Status and Prestige

Gold has long been associated with social status and prominence in many cultures, and it is no different in Indian society. There is no grander emblem of affluence in Indian culture than gold.

Throughout history, from the reign of the British to the era of independent India, gold has engraved its presence deep within the nation’s culture. 

The amount of gold someone owns represents their authority and ability to acquire this precious metal despite its rising prices.

Wedding and Celebrations

Special occasions such as weddings, the birth of a child, festivals, and other celebrations also involve lots of gold; traditionally, both men and women wear and display lots of gold during these events. 

One custom is for families to gift gold jewelry to the bride as part of her dowry and to the groom as a symbol of prosperity. 

Because gold is a sign of future success, it is often exchanged as gifts, particularly during ceremonies and special occasions. Indian brides use about 300 grams of gold at their weddings, leaving large quantities of gold in the form of gifts. 

Yearly festivals like Diwali, Dhanteras, Akshaya Tritiya, and Pongal are considered lucky for purchasing and gifting gold, with many people buying gold during these occasions.

Living and investing in India: Pros and cons


Investment

Investors worldwide consider gold as a reliable form of investment and a hedge against inflation and economic uncertainties. 

Indian investors possibly appreciate this aspect of gold more than others, and it is often viewed as a store of value that can be easily liquidated in times of need. It is also a favored asset choice for individuals looking to diversify their investment portfolio.

Gold in India’s Impact on Global Markets

To help us understand the impact of culture on the gold markets, our gold experts, J. Rotbart & Co., said that they look at the monsoon season in India as an indicator of how good the crops will be later, which in turn, impacts how much gold the farmers would allow themselves to buy for weddings and the family.

Another event that significantly impacts gold markets is the largest of all Indian festivals. Diwali is the festival of lights. Diwali holds the same significance as Christmas for Christians, and this annual celebration is spread over five days and takes place in October/November each year. The festival and its lights represent the inner light that shields against spiritual darkness.

Indians partaking in the festivities buy up gold jewelry, bars, and coins for the occasion, leading to a notable spike in the gold markets at this time of year. 

According to the World Gold Council, with an estimated 13 million weddings per year in India, bridal jewelry and gold jewelry, in general, makeup around 50% of the market share. 

This bridal jewelry trend will likely remain strong in the coming years. India now has the biggest population on earth, with 1.4 billion inhabitants, half of whom are under 25. 

As mentioned above, jewelry is gifted to a woman for her wedding; it remains exclusively her property and is, therefore, a vital form of financial security.  

As the Indian government strives to boost manufacturing and exports, gold jewelry exports will likely improve over the coming years. The gold market is evolving, with changes mainly by economic growth in India and globalization. 

There are a few ways to buy or invest in gold, including paper gold products, such as exchange traded funds (ETFs) or gold futures. These are financial products that basically let you track gold rates. However, it’s important to note that you don’t actually own the physical piece of gold. 

At Nomad Capitalist, we work with gold professionals, like J.Rotbart & Co., with expertise in global gold markets. They recommend purchasing physical gold over paper gold products, especially if you are a high-net-worth individual looking to protect your assets and secure your wealth.

As discussed, jewelry is often used as a form of physical investment in gold, particularly in India and China. However, most of our clients invest in gold bullion bars or coins. 

FAQS

Is there a difference between 24 karat gold and 22 karat gold?

The key differences between 24 and 22-karat gold are purity, durability, and in turn, cost of gold. 
24K gold indicates a high purity level of 99.9% pure gold
22K gold is approximately 91% purity of gold
24K gold is less durable than 22K gold and is considered too soft to withstand everyday wear and tear. 
18 karat and 22 karat gold is preferred for Indian jewelry as the inclusion of other metals, such as copper, enhances the jewelry’s durability.

Is investing in gold a good option?

Is gold a wise investment choice in 2023? The answer to this question largely depends on your investment goals.
Many financial analysts believe that the price of gold is benefiting from a weak US dollar and the Federal Reserve tapering its interest rates.  
Gold has long been considered a dependable, long-term investment choice as part of a balanced portfolio. However, conducting your own research and enlisting professionals when considering gold as an investment is crucial. 

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