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BRICS ARE BUYING GOLD – CASE STUDY: INDIA

In the months and years to come, gold will rapidely become an essential trading and strategic asset between nations. Already countries like China and India are moving from dollar to gold. The biggest reserves of gold are still owned by the west but in the next decade there will certainly be an new balance. 

Recently, BRIC countries have been speeding up the gold assets spending in order to cover against rising inflation risk and global macroeconomic uncertainties. Going by the rate at which BRICS are expanding there gold assets, it will soon outstrip the Western countries as the biggest holders of gold.

Demand from China and India accounted for a whopping 41 percent of the total global demand increase last year. Countries like Russia and India are not much behind China in the gold chase. Russia’s central bank bought 2/3 of the country’s whole national production in 2010 while India purchased about 770 tons of gold last year. India for its part bought 200 Tons of the precious metal from the IMF in 2009 to protect itself from the slumping dollar.

Also, India is currently the biggest gold consumer in the word. The same can’t be said yet for China. For the last 20 years, World Gold Council has noticed that India’s annual gold consumption have increased from 400 to 800 tons. Estimated Indian gold taken in account private holders is estimated at 15000 which is double the amount of the biggest american holders.

Besides, Indian fascination for gold made items is deeply rooted in their culture and history. The metal hoarding takes the form of bullions and coins and is used as ornaments. As a traditional rule, the Indians prefer to torn the gold into jewlery, bracelets and bangles. The poor people have no strong boxes or safes so they store the precious metal underground or somewhere in their room.

As the largest consumer of gold since ages, Indian economy could be the most well prepared economy to faced the next financial crisis. However, the government has still to face one problem. The gold held by Indian people is privately locked and therefore it is not used enough for trading purposes. In consequence that hoarding wealth is really currently not serving the Indian economy. While the government introduced many schemes in the past to unlock the privately held gold value, none really worked as people hold the view that keeping gold at home brings them a sense of security and safety.

Indian case is interesting beacuse the hoarding gold problem can happen to other countries when the dollar and the euro will eventually collapse. Governments may eventually implement policies prohibiting gold hoarding.

Video links:

Indians buy gold

From greenback to gold in India