Why are we Indians fascinated about Gold so much?
Having a friend’s or relative’s marriage in future? Mere 1 gm of gold coin costing about <3k INR would sound mightier than a washing machine costing about 8k INR. Over the last 5-6 years, Gold has been the most promising investment. Giving about 25% returns in a year. However, there is a problem. Gold is just a shiny metal which is over-hyped. I remember I attended a workshop in Bombay stock exchange where in the ex-president of the BSE just ridiculed Gold as an investment.
Some of my thoughts:
1. Gold is very trustworthy metal. It has a proven record in the history of mankind to bring them out of trouble in times of need – Be it marriage, Be it war, Be it a big loan repayment – Gold comes in handy. About 6-8% of human mind in India revolves around Gold. Whenever they want to go for ‘shopping’ when they have large amount save, they would buy GOLD. I know many people who would spend their entire savings only to buy GOLD. There are Gold schemes in India which encourages everyone to invest a part of their salary in GOLD every month!
2. Fact: Gold is not mined in India so much. Gold has to be imported. Like OIL, Gold is very less in India but the increasing demand has created a lot of Gold imports in India.
3. Gold is nothing but a stagnant yellow metal: You practically can’t use Gold to do anything. Just sit back and relax while its locked in your locker. Its just a useless metal which has blocked minds of innocent Indians with its glittering sparkle! Btw, over the years, I’ve found one great use of gold. You can make Gold wires in your homes electrical cabling. Gold is a very good conductor with a very low power loss in transmission! I.e if you care for electricity bills and I.e if you’re super duper filthily richie rich!
But hey, for an average Indian, a locked asset in their locker – which they take a look at only to see that its safe, gives them mental peace and a feeling of superiority over others which is far more satisfying than a good meal – So yes, Gold does bring mental peace to Indians which is an Irony understated.
4. What next: Once you have all this Gold which is already imported into India by millions of buyers, what next? Since Gold has no other practical use, no one wants to trade gold with one another unless something important comes up like financial crisis or war. What’s the probability of such happening and to how much percentage of the general public? So basically it becomes a lumpy piece of metal lying in your locker giving you mental peace ONLY without any economic growth.
5. India doesn’t sell Gold. May be it does but the percentage is very less. Why would someone want to buy gold from India. Yes, Iran would get gold from India because India cannot pay them for the imported Oil – Due to the dollar problem (Not that Indian cannot pay)
In Conclusion: What can you do as an Indian ?
Its practically impossible to tell any Indian “Stop buying gold”. It would be like telling an Indian “Be there on time – Sharp”. What’s recommended is that do not buy Gold if you have excess cash. Invest in something else – in may be a business! Or something else..! Give a percentage of it as charity..
Mark my words when I say this: The more Gold India imports, the more liability will it add in the future. So its my very humble request to all you super duper richie rich fellas reading this blog – Invest wisely. All that glitters is not gold!