21 November 2009
The legend goes that when Venkateswara, the incarnation of Lord Vishnu, wanted to marry princess Padmavati, the king asked him to gather wealth comparable to his khazana. Venkateswara, born in a poor family, then sought a loan of gold from Kuber, the god of wealth. Since then, down the ages, devotees have donated gold and jewellery - a symbolic gesture to help Venkateswara win the hand of the princess. At the heart of this practice is the temple at Tirupati, known to be the world's richest. The glitter of gold has attracted Indians for centuries for a variety of reasons - ranging from a medium of transaction to protecting wealth, securing the future and as jewellery. In the recent past, the volatility of the stock markets has only added to the luster of the yellow metal. The fact that gold has traditionally been considered a hedge against inflation and a depreciating dollar too has fuelled its demand.
It is estimated that about 15,000 tonnes of gold is privately held in India, more than twenty-five times as large as the official hoard of 558 tonnes after the RBI's recent purchase of 200 tonnes from the International Monetary Fund (IMF).
In one year, gold has appreciated by 53 per cent, from $742 to $1,134 an ounce in international markets. Considering this jump, the value of the country's privately held gold reserve, the highest in the world, has jumped from $357 bn to $547 bn, posting a rise of $190 bn (Rs 7.64 lakh crore). "Over a period of ten years, privately held gold reserves have increased significantly in the country as consumers have bought more gold to preserve their wealth," says Dharmesh Sodha, director, World Gold Council- India.
Sodha estimates that the reserve has gone from 10,000 to 15,000 tonnes in the last decade, going by the average net import of 500 tonnes annually. Southern states like Kerala and Tamil Nadu have the highest per capita gold holding, he added.
Gold is valued in India as a savings and investment vehicle and is the second most prefered investment behind bank deposits. PP Jose, Joy Alukkas Traders India, a Kochi-based jewellery firm, says Kerala accounts for at least 15-20 per cent of the gold business in the country. "Traditionally, people here buy gold at weddings to secure the future of their son or daughter," says Jose. The wealth taken by the bride to her new home also gives her a sense of economic empowerment, he feels.
"As gold offers safety and better liquidity, people prefer to park their savings in the yellow metal," said GR Ananthapadmanaban of GRT Thanga Maligai, a Chennai-based jewellery firm.
Gold purchases in Kerala and Tamil Nadu are almost exclusively meant for weddings, but among the relatively more market savvy Gujaratis, Marwaris and other business communities, gold buying is also driven by the metal's attractiveness as an investment. "I have been buying gold since the last thirty years, but my allocation for gold has increased in the last two years. Earlier, I used to buy 500 grams of gold a year and now I buy about double that amount," says Manoj Soni, a leading bullion investor in Ahmedabad.
Religiosity too seems to make common cause with the most universally recognized symbol of material wealth. Parimal Nathwani, a trustee of the Dwarka and Nathdwara temple trusts, says, "Most temple trusts get a lot of gold as offerings. People believe that God also likes new things."
Whether it's for security, returns or other purposes, what's clear is that India's hunger for gold remains insatiable.