Gold, the shining yellow: an Indian perspective

India is a country with 1.25 billion people and a large savings culture. It may be a broad generalisation that Asians are big savers but Indians live up to the reputation. And they save in different assets to elsewhere in Asia – particularly in gold.

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Indian women, in particular, are behind a strong household budgeting and savings culture as many household financial decisions are taken by women. Often these women do not have the privilege of a formal education but have still succeeded in growing household wealth.

"Women are a mainstay of the preference for gold in Indian savings culture."
Tarun Gulabani, Senior relationship manager, ANZ

And it is these women who are a mainstay of the preference for gold, the ‘shining yellow’, in the Indian savings culture.


Gold in traditional Indian society ranged from having an ornamental use – and displaying status – to an Industrial one. As an asset it has also served well as an inflation hedge in an economy prone to bouts of inflation.

Indian finance experts have long valued this inflation-beating quality and advised clients to buy the shining yellow.

Gold’s hedging quality is based on an inverse correlation with other assets, typically rising if the stock market turns negative.

It could be seen from the figure below the spike in gold prices in recent times.

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Historically global investors have turned to gold when there is turmoil in financial markets. The US Dollar, Japanese Yen and gold are considered safe haven instruments.

In 2016, gold has risen about 25 per cent but has had a small dip of about 2 per cent recently. It went as high as $US1772 and came down to $US1051 in past five years.

Gold as an asset class can be sold or traded against other goods quite freely. This gives the metal its inherent value. It is now even more frequently traded via synthetic instruments such as exchange traded funds (ETFs).

Historically gold was bartered to trade in commodities. It has always been regarded as an important and expensive commodity and one of the few assets different civilizations have agreed to trade with. With such widespread acceptance, it acquired the title of the ‘currency without a country’.


Historical factors are important in India but several of gold’s attributes are particularly valued.

Safety: While the value of currencies and other asset classes can drop and disappear in matter of seconds and minutes, gold is assumed to have a high intrinsic value due to its precious metal status.

Rarity: In tandem with its preciousness, gold is relatively rare and hence supply constraints add to its allure.

Hedge: India has been subject to runs of high inflation in recent times and hence gold’s protection against inflation has come to the fore. So too its safe haven status during the economic crises of recent years.

Central banks: While central bank holdings of gold have fluctuated, those holdings have long provided base line demand for the shining yellow.

Financial planning: In Indian savings portfolios, gold always has a place to a greater extent than other societies.


Mythology: Gold has been an integral part of the Indian wardrobe in mythical times and descriptions of golden crowns, arm bands and armours abound in history and art.

In our literary history the narratives talk of gold as part of the wardrobe of the Gods and famous Kings and Queens. With this deep history, during major festivals Indians buy gold as a way of seeking blessings by replicating what the Gods did. The superstition has however often paid off, as the shining yellow has helped many in tougher times.

Principles of finance: Regular savings and cost averaging involve buying an asset at regular intervals over a period of time. This ensures the total cost of acquisition is better insulated against peaks and troughs and appreciation has a larger effect on the total holdings of the asset.

Gold buying at regular intervals, for example at festivals, has had the happy benefit of replicating an ‘averaging in’ investment strategy.


While buying patterns have been sentimental and almost compulsive during festivals, the Indian perspective is shifting from just owning an auspicious piece of metal to recognition of the investment value.

Indian authorities have recognised this and introduced a few instruments like a Gold ETF, physical gold bars with authenticity certificates, E-Gold (D-mat Form) and Gold Funds.

October is the month of Diwali, the biggest Indian festival, the Festival of Lights. One of the key traditions of Diwali is to buy gold on one of its three days to bring luck and wealth.

There are various ways the shining yellow is flashed by different classes of society. The poor tie together small pieces they’ve collected; the rich wear ear rings, finger rings and other jewellery while the super-rich wear gold chains, rings and many more accessories.

Gold is also given as a gift on festivals like Diwali or on auspicious occasions like marriage or the birth of a child. Usually gold coins or gold chains are given on such occasions and the amount of gold depends on the intimacy of the relationship and the selection of the giver.


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Right through Indian society, even in the poorest strata, there is a tradition of transferring assets down generations. Gold is typically the vehicle and normally the transfer is organised by women.

Women pass gold to women, to use during a crisis or simply as a gift for ornamentation. The Indian states of Kerala, Delhi, Orissa, Rajasthan have a particular predilection for gold and are famous for their exotic jewellery. Gold is also particularly popular in Karnataka and Hyderabad where gold is mined.

It is said the Nizam (ruler) of Hyderabad was the richest human being in the world and he owned a lot of the gold that was excavated in the state in those times. Even his clothes were reputedly made of gold threads. Embroidering clothes with gold thread is still practised in some parts of India including Hyderabad.

But all of India from Mumbai, Chennai, Kolkata and Madhya Pradesh to West Bengal have dedicated markets for the retail and wholesale transfer of Gold.  

Tarun Gulabani is a senior relationship manager at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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