Gold loses its glitter
Gold will still have a place in family portfolios, but hopefully dwarfed by financial assets
Is India finally overcoming its gold bug? The World Gold Council has said that gold consumption this year is likely to be the lowest in eight years. The apex organization of the international bullion industry said the reason for the drop in demand could be the government’s war against illegal wealth, as well as a weak farm economy. There is no doubt that both are important explanatory factors. But there is another possible reason.
People buy gold as a hedge against high inflation—especially when real interest rates on financial assets are negative. India had nearly a decade of high inflation plus low real interest rates. The sharp decline in inflation over the past two years has made financial assets more attractive. Indians have shifted from physical to financial savings.
Love of the yellow metal imposed heavy costs on the Indian economy. High gold imports were one major reason the rupee came under pressure in 2013. Gold will still have a place in family portfolios, but hopefully dwarfed by financial assets.
Editor's Picks »
- Huawei’s CEO built an empire. How Donald Trump could tear it down
- Kerala gets its fourth international airport in Kannur. Here’s how it looks
- Onion price slump sharpens Modi’s election stakes
- NPS bonanza for govt employees: More tax benefits, higher centre’s contribution
- The US has Huawei in cuffs. China has the US in chains
- The government has a troubling message for minority shareholders
- Opec-allies’ output cut may not amount to big shift in oil prices
- RBI’s new loan rate math for banks cannot ignore deposits
- Maruti loses speed as PV growth slows amid rising challenges
- Risks emerge for Ramakrishna Forgings, Bharat Forge, Motherson Sumi as heavy-duty trucks face headwinds