THE HINDU festival of Akshaya Tritiya, celebrated on May 7th this year, is considered an auspicious time to buy gold. Queues outside Indian jewellery stores become so long that makeshift tents are set up to accommodate the rush. Cashiers hand-count wads of banknotes in conditions as noisy as those in a busy fast-food restaurant. The salesmen cater to a remarkable level of demand. As a group, Indians buy more gold than anyone apart from the Chinese (who have occupied the top spot since 2014). Indian households are reckoned to have a stockpile of gold worth $800bn. Yet the Indian market is not as healthy as it was. Purchases of the metal have fallen by around a fifth since their peak in 2010. Why is gold losing its sheen?
Start with changing tastes and preferences. Around a third of Indians are 18 to 35 years old. They often prefer to spend their money on electronic gadgets, purchased in monthly instalments on zero interest rates, rather than jewellery. In 2017 consumer electronics toppled gold as the second-biggest contributor to India’s national import bill, behind oil. Moreover, the tastes of those who buy gold appear to be changing. Heavy jewellery has given way to Why Are Indians Falling Out of Love With Gold?, sometimes with lesser caratage. “Gold is no longer a sign of wealth but of fashion,” admits one customer at a jewellery store in Mumbai. As if to confirm this, in February the price of gold rose almost to a five-year high, dampening its allure as a store of value. This discourages those customers who would buy 22-carat bling, the purest gold suitable for jewellery, with a view to melting and reselling it at a later stage.
Courtesy: Economist
