India and Indians continue to be obsessed with the yellow metal. According to the World Gold Council, the country will import more than 750 tonnes of gold this year, far higher than the 559 tonnes it did in 2009. Expectedly, much of this is driven by demand for jewellery. In the three months to 30 September, Indians bought 214 onnes of gold, of which 184.5 tonnes was in the form of jewellery.
Ironically, the purchases seem driven more by the love of the metal than any desire to invest in a safe-haven asset. Owning gold jewellery isn’t the same as owning bullion or even paper gold (a gold exchange-traded fund was recently launched in India). Most jewellery passed off as pure gold in India is mixed with other metals. At best, the value of such jewellery will appreciate, but not at the same rate at which bullion does. At worst, it will probably not even fetch its cost price.