The golden path……to future prosperity does not lie in go

It is a figure that boggles the mind. An estimated 13,000 tonnes of gold, which translates into something like $95 billion dollars, is ly...

It is a figure that boggles the mind. An estimated 13,000 tonnes of gold, which translates into something like $95 billion dollars, is lying in India’s household safes and bank lockers with its productive potential lost to the nation. It is a piece of statistics that has prompted international economists to rue this country’s ostrich-like mindset.

Indians, or so the argument goes, don’t trust their governments, their financial institutions, their industry, with their wealth, preferring instead to spend it on the yellow metal. Internationally, India is the largest consumer of gold. What’s even more significant, the USA, the country that is second on this list, consumes only half the quantity India does.

Of course, a great part of this country’s gold purchases are conditioned by social and cultural customs. Even extremely poor families are expected to buy something like 20 to 30 gm of the metal for the marriage of a child and celebration of festivals like Diwali often entails the mandatory purchase of gold jewellery.

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But times seem to be a-changing. The World Gold Council has already reported a 24 per cent decline in demand for the metal within the country in this year’s first quarter when compared to the same period last year. It may be early days yet to view this as a paradigm shift in consumer habits but it is, nevertheless, a very important development. From all indications, the trend will only get accentuated.

Today gold, as a source of investment, is rapidly losing its allure, provoked partly by the sharp dip in world bullion prices in the wake of some countries choosing to offload their national gold reserves in the global market. Britain has already auctioned 25 tonnes of gold last week and is expected to shed more than half its bullion reserves as part of a phased programme.

In an assessment carried in this paper on Thursday gold, which has now slumped to its lowest value in 20 years, was found to be one of the worst forms of investment, with its value not even keeping pace with that of inflation. While inflation rose by about 8 per cent over the last decade, gold gained by an estimated 2 per cent or so.

While the lure of gold will always remain, given its eternal cultural resonance, it is time for the Indian consumer and investor to read the writing on the wall and actively consider other investment options. Money that now goes into buying a bauble that is worn occasionally but for the most part locked up, should rightly go towards giving this country’s economy a boost, towards building its roads, its bridges, its airports.

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These are the investments that will add a lasting sparkle to the future. In the familiar tale of yore, Midas, king of Phrygia, discovered after a great deal of personal tragedy that his capacity to turn everything he touched into gold proved to be his undoing. It is time that the citizens of this country rediscover for themselves the gilt-edged truth in this cautionary tale.

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