SIES-FPJ: Gold oldest darling for India’s investors

11:37 PM Jul 28, 2021 |

Culturally, India has a leaning towards gold. It has continued to grow over years. But government policies stunted its growth, pushed it underground, and inadvertently encouraged malpractices as well. Then came the slowdown, high gold prices and the pandemic caused economic downturn. Gold demand also fell. But it remains crucial to and vibrant in the rural economy.

To highlight the role of gold in rural economy, Free Press Journal and SIES in association with NSE, East-West Seed and NCDEX (National Commodity & Derivatives Exchange) investor protection is organising the session ‘Rural markets and gold’ on August 27, 3 pm onwards.


Click here to register.


The session, which will be moderated by R N Bhaskar, Consulting Editor, FPJ, will have names likes Shivanshu Mehta, Head, Bullion, MCX; Keyur Shah, CEO - Precious Metals Business, Muthoot Pappachan Group; PR Somasundaram, MD, World Gold Council; and Ravi Varanasi, Chief Business Development Officer, NSE as the panellist for the session.

Today the world has moved from physical to digital gold or ETF. So, has India. But that is investment gold. The market for retail gold is significantly bigger. Thus, for retail investors in India, physical gold continues to be prized possession. Before understanding the present standing of the yellow metal, it is important the history of gold in India is considered.

India was among the foremost traders in the world that used gold as currency, often exchanging its offerings against gold coins. It was South India that took the lead in this type of trade. But the allure of gold spreads to the whole of India. According to Karvy Private Wealth, south India as a region continues to be the largest consumer of gold in the country. The appetite for gold of the southern states is evident even in the high-profile gold smuggling case which continues to unravel in Kerala.

According to the World Gold Council (WGC), two-thirds of India’s gold demand comes from rural areas. This shows the demand for gold in rural India. Despite being drivers of gold demand, this section of consumers do not get quality gold and end up making losses when they sell or pledge gold. The rural community needs to be serviced better. This is possible firstly when it gets access to quality gold and there are proper systems that do not let traders cheat rural folk.

At the same time, timely intervention by the government over gold policies will help revive the quality of gold sold in the country and demand for gold.

In the present scenario due to COVID-19 gold has touched a new low. While gold prices soared, India's gold demand in 2020 fell 26-year low, according to WGC data. Even so, demand for gold ETFs has soared. This drop in demand was mainly due to high prices and the coronavirus crisis. The demand stood at 415 tonnes. India's gold consumption in the first half of 2020 dropped 56 per cent to 165.6 tonnes on a year-on-year basis. However, the demand is expected to revive as soon as the rural economy starts to grow. This is possible if there is a bumper crop and appropriate price realisation for the agriculture produce.

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