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Sidheshwar Shirsath, who lives in the suburbs of the financial capital of India, Mumbai, began to buy gold when he married nine years ago.
Shirsath, 35, works as a driver and earns around 55,000 rupees ($ 889 CDN) per month. He decided that gold could be a good way to build a nest egg for the future of his family.
Whenever he had money to spend, he bought gold jewelry, including rings and bracelets, and he now has about 130 grams of gold, worth more than a million rupees ($ 16,000 CDN).
“Some time after buying gold for the first time, the prices began to increase, so my interest in investing there has also increased,” said Shirsath.
In recent months – to his joy – the price has skyrocketed.
Gold Globally was traded at US $ 3,298 one on Friday morning, up more than 25% since the start of the year, and up 42% compared to a year ago.
Gold value on a global scale increased in the world of global economic uncertainty And geopolitical tensions, including concerns concerning the impact of the pricing policy of American president Donald Trump.
Precious metal is often considered as an asset of “safe refuge” to which investors flock during periods of economic turbulence.
“Gold is part of the social fabric”
In India, the price has increased even more sharply and has increased by 30% since the start of the year – with the additional increase drawn by the depreciation of the rupee against the US dollar.
But for many Indians, like Shirsath, gold is more than an investment.
“Gold is very close to Indian women,” he said, his wife, Manisha, sitting next to him in their modest house, adorned with a golden neck and bright bracelets. “They need gold – especially for festivals and weddings.”
In India, gold mainly buys it in the form of jewelry because it can be a means of showing its richness and its status. Precious metal also holds Huge religious and cultural meaning.
He is part of the dowry in weddings, for example, and he is considered good to buy gold during certain Hindu festivals.
“India is a very unique market for gold,” said Sachin Jain, regional CEO, India, for the World Gold Council, a global industry association. “Gold is part of the social fabric, and you don’t need to be in particular economic layers to consume gold.
“We all have a family doctor in India, so to speak, and we have a family jeweler.”
India among the largest gold consumers in the world
In rural India, where most of the country’s 1.4 billion people are still living – and with a lot of easy access to bank accounts – gold is a popular way to store savings, Jain said.
All this means that India is one of the largest gold consumers in the world, the country’s demand for precious metal reaching around 800 tonnes per year.
The high price, however, has an impact on the amount of metal that people buy.
“With the consumption of jewelry, whenever the price of gold increases, the consumer waits and looks,” said Jain. “As it will be resolved a bit, we see consumers return.”
The data of the World Gold Council show that the gold demand in India in the first three months of this year was 118.1 tonnes, down 15% compared to the first quarter of last year.
But because the price is increasing, the value of the country’s gold demand – which is the amount of gold purchased or invested – in the first quarter of this year, in fact increased by 22%, reaching 940 billion rupees (15.1 billion CDN).
“People buy lower quantities,” said Colin Shah, Managing Director of Kama Jewelry, a manufacturer based in Mumbai. “They all have budgets. If someone has $ 2,000 to spend, they will spend this and buy a lower volume.”
But, he said, that gold has in no way lost its brilliance, despite its high price.
“In India, there is a golden culture, and no one is going to stop buying gold because of the prices,” said Shah. “In fact, they will have more confidence in the category because of the return they make on their money.”
Investing in digitally gold is increasing
With the appetite of the Indians to have gold showing no signs of relaxation, the government in recent years has taken a series of measures to try to ensure that gold is introduced into the formal economy.
These include reducing import law on gold last year to 6%, against 15%, partly as a way to make people less attractive for people to pass gold in the country to avoid paying high taxes.
The government also offers sovereign gold obligations as an alternative to physical gold.
The Jain of the Global Gold Council said that the Indians are investing more and more in digitally gold, for example, through negotiated funds on the stock market (ETF) – and that prices overvoltage has only encouraged people to examine these options.
“The young generation becomes more and more informed, and with the ease of technology, we believe that investment in golden and gold assets will become a little more digital,” he said.
The demand for investment in gold, including ETFs, increased from seven% in India to 46.7 tonnes in the first quarter, according to the World Gold Council.
Jpmorgan provides that the price of gold could reach US $ 4,000 an ounce next year.
Shirsath said that he and his family had more than like jewelry now, but he still wants to continue buying gold.
“My next plan is to buy gold coins or opt for bonds.”
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