Atul Prakash, Reuters
Allahabad: Gold. It’s the ultimate luxury gift and nowhere more so than in India where brides are draped in gold from dowries laden with jewellery.
With around ten million brides getting married every year in India, many festooned with gold, it’s no wonder that India is the world’s largest consumer of gold.
India accounts for 20% of annual global demand for gold, devouring 800 tonnes of the metal annually, mostly as jewellery.
Ruchi Midha, a typical middle-class Indian bride, received four gold necklaces, eight bangles, six pairs of earrings and five rings — all made from 22 carat gold — from her parents, relatives and friends for her wedding.
That’s roughly standard for middle-class brides in India where gold — known as “Stridhan”, or woman’s wealth — is seen as financial security for brides.
“Gold is deeply entangled and interwoven with the Indian culture and no custom is complete without gold jewellery, be it marriages or any other ceremony,” said Neeraj Mehrotra, a partner in Manmohandas Jewellers, a leading Allahabad jewellery store.
Gold prices hit a 26-year high of $730 (Rs30,433) an ounce last year and surged 60% in two years. But its glitter has shown no signs of fading in India, the world’s second-most populous country.
It’s seen as a portable form of wealth in a country where stocks and bonds are sometimes viewed with suspicion despite an economic boom that is bringing affluence to many Indians.
As the Indian economy steams ahead by more than eight percent annually in the past four years, an ever increasing stream of money is going into gold purchases.
“India looks poised to remain the world’s foremost gold consumer for many years to come. Its dynamic population growth and strong cultural and religious affinity to gold will continue to underpin structural demand,” said Natalie Dempster, investment research manager at London-based World Gold Council.
Over generations, Indian households have accumulated an estimated 15,000 tonnes of gold worth $320 billion — 40 times the amount of gold held by the country’s central bank and nearly double the amount held by the U.S. central bank.
Marriages are costly affairs in India, where many families spend more than two years income on the wedding of a single daughter.
“Gold is considered an investment for life, so Indian women continue buying it, to be given away to their daughters or grand-daughters,” said Rashmi Sanyal, a journalist in New Delhi.
Jewellery shops are packed with people who come to buy gold for weddings, which take place on auspicious days in the Hindu calendar. Demand jumps during the festive season from August to November when Diwali, the festival of lights, is held.
A symbol of wealth and prosperity in the Hindu religion, gold is considered so pure that Hindus never wear gold on their feet. Only silver is used for this purpose.
Sweets wrapped in gold foil are eaten at festivals. Gold is also used in traditional medicines and some silk dresses have embroidery with gold threads.
India, the world’s largest exporter of cut and polished diamonds, is also fast emerging as a leading exporter of gold jewellery. Worth $3.86 billion a year, the jeweller is exported to the United States, the United Arab Emirates and Britain.
Most Indian jewellery is hand-made and contains 22-carat gold, with manufacturing costs accounting for 5-15 percent, against 30% to 60% in Europe, where 9-to-18-carat gold is popular.
Despite grinding poverty, rural Indians account for two-thirds of annual gold purchases as they prefer to put their money in gold due to poor banking services in villages and towns.
Gold is important for people hit by floods that kill hundreds and displace millions in India every year, as it means villagers faced with the dangers of flooding can carry their wealth with them in the form of gold jewellery which can be easily sold.
“Rural India becoming more sophisticated and realising that gold is not always a great instrument is a far distant dream,” said an analyst at IL&FS Investmart.
Dhirendra Mishra of the north Indian village of Thata said there were only two banks among about 20 villages in his area.
“Some people get scared of long bank queues and prefer to convert a part of their surplus income into gold,” he said.
Most bank managers in Indian villages are still happy to take gold as a pledge for agricultural loans.
“For generations, Indians have a perception that one’s worth is either measured by the amount of gold or the amount of land he has,” said Azmat Siddiqui of a high-end jewellery store chain.
“Every household in India has some gold. It’s a traditional form of investment. It is in the genes,” he said.
—Additional reporting by Hari Ramachandran in New Delhi