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Gold: Ornaments, Uses, Consumers, Investors, history and Gold Market in India
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History of gold in India
Gold is forever. People consider gold as a true asset. Since time immemorial, it is one of the costliest metals. It's glitter attracts people and they love to wear it as ornaments. Gold has no or minimum effect of weather changes on it. Its rarity makes it expensive and everybody likes to possess it. It has a universal value that has never changed (with time). Governments and central banks keep it as reserves. most of the persons, rich or poor, like to keep their savings in the form of gold.
Indians are in love with Gold:
The predominant population of India is Hindus. They believe gold as a metal of gods and monarchs. Hindu religious books have mentioned gold as a commodity of immense value. People in India wear gold Jewelry for ornamental value on most of the social functions, festivals, and celebrations. Hindu culture and their love for gold have influenced people of other religions in India. Therefore, all most all women in India like to wear gold Jewelry irrespective of their religious belief, social and cultural background. A large number of Indian men also wear gold Jewelry in the form of chains, bracelets, and rings.
Gold Ware Bracelet, French
India, world's biggest consumer of gold
There are historical reasons for being the biggest importer of gold. India had been enjoying the status of most advanced and rich country in the world for millenniums. India was called golden goose at those times. India had been exporting silk, spices, speaking parrots and many other consumer goods to Romans, Greeks, and Egyptians in ancient times. India was the biggest producer of consumer goods at that time. India was the biggest exporters too.
India had claimed two third of global exports at that time. They were exporting a lot but had nothing to import. Therefore, they imported gold and gemstones against their export. India has accumulated a huge quantity of gold and it continues to do so. It is believed that India possesses at least twenty percent of total gold in the world. India consumes the highest quantity of gold in the world amounting to 700 tonnes per year that is about four times of the US.
India produces a huge quantity of gold Jewelry. Adherence to ethics made Indian Jewelers trustworthy. Gold also enjoys safe-heaven status for investment.
Top 10 Reasons why Indians Love Gold - Really Funny
Gold import and the government policy
Official gold import of India has estimated at eleven hundred tons. This figure does not include gold jewelry import and gold smuggled into India. It is generally assumed that India imports more than three thousand tons of gold.
In the sixties, the Indian government had imposed a ban on official import of gold except against value added export of gold jewelry. Therefore, there was no official import those days. The only channel for import was smuggling. In 1992, the government has liberalized its policy and permitted non-resident Indians to bring in five kilograms of gold per person on payment of import duty in hard currency. The government has further liberalized gold import policy and allowed ten kilograms per person. Indian government now allows official gold import.
UPDATE April 20, 2015
The government of India has taken a policy to reduce gold consumption thus gold import in India. The government has been using several methods to reduce it. An extra import duty is imposed on gold imports to discourage people from importing gold.
The government of India has made it compulsory to mention PAN card number on every purchase above Rs. one Lakh. We know that black money is extensively used for purchasing gold and mentioning PAN card number is a check on black money.
The Indian government, by taking these measures are able to reduce gold import in India.
Antique gold earrings, South India
Gold and Gold jewelry in India
India has witnessed income tax slab up to ninety-seven percent at one point in time. This resulted in large-scale tax evasion. The tax reforms of the last several years have indeed reduced the level of evasion. The parallel economy of black money is continuing in the country even today. One cannot keep cash that is black money in Banks. If they do so; they cannot hide it from the tax authorities. The most convenient way to keep unaccounted wealth is in the form of gold Jewelry.
Black money is still a concern for Indians. It is increasing due to corruption.
Moreover, Indian rupee had been continuously depreciating against hard currencies in the twentieth century. It encouraged investors investing in gold at that time. Despite price fall in dollar terms, gold has shown an uptrend in Indian rupee on the long-term basis. Therefore, Indians continue to believe gold as a safe tool for investment and hedge against inflation.
Gold price in India is higher than the international price because of import duty. Kolar is the only gold mine in India that produces a small amount of gold. Due to huge consumption of gold in producing Jewelry and inadequate production, India continues to depend on import.
Some other reasons of popularity of gold
A Large population of India lives in villages. Many of them, in recent past, were too poor to have proper living arrangements. These poor people had negligible assets. They wanted to keep it in their physical possession all the times because they had not even residences to keep it. Hence, wearable gold Jewelry was the only option for them. Floods and droughts were a continual phenomenon of their lives. Those forced many villagers to flee to safer places. It was easy to carry gold Jewelry while fleeing in distress. They used to sell or mortgage it while in crisis and purchase it in good times.
Approximately ten million marriages occur in India every year. India has a tradition of gifting gold in the marriages. Rich, middle and poor all of the classes bestow gold in the form of Jewelry upon their daughters. Rich and middle classes also have a trend of presenting gold Jewelry to the near relatives of the bride and the groom in marriages. These marriages require about one thousand five hundred tons of gold every year. It is evident that gold demand in India cannot easily go down.
Agriculture is the base of Indian economy. Gold Jewelry is popular among farmers too. Gold jewelry sales spurt after a bumper crop.
There are many religious, social and cultural festivals in India. Affluent people generally present gold ornaments in these festivals to females in their family.
Antique gold necklace, India
Gold Jewelry in India
The jewelers use gold in diamond and color stones studded jewelry (studded with ruby, sapphires, coral, emerald, pearl, tourmaline etc) besides plain gold Jewelry. They also use it while producing Kundan Meena Jadau Jewelry. India consumes as well as exports gold, diamond and Kundan Meena Jadau Jewelry and articles. All these require a lot of gold.
India has grown as a major player in the software and BPO markets. Indian software engineers are highly rated in developed countries (US, EU, Canada, Japan etc). Non-resident Indians are very rich. They are the main sources of hard currency required for gold imports.
Some other uses: Rich people use golden embroidery in their expensive dresses. Some ayurvedic and homeopathic medicines contain gold. Some people embed gold in the foundation of a new house. They consider it very auspicious. Some people place some gold in the mouth of a dead body at the time of the funeral. Painters use gold in their paintings. It is a common trend in India to gold-paint idols, temples, and monuments. Gold painted handicraft items are also popular in India. Thin flaps of gold (Vark or Tabak) are also used in the expensive sweets. Gold has some industrial uses too.
It seems that Indian Gold demand will remain high with the economic prosperity of the Indians.
About Kundan Meena Jadau Jewelry
Gold shopping Festival of India: Dhan Teras and Akha Teej
India is a place of festivals and India has a love for gold. Hence, both festival and gold are amalgamated in India. Indian people love to buy gold, especially when in the festive mood. Akshaya Tritiya (Akha Teej) and Dhan Teras are special days among festivals of India for buying gold and silver.
North Indian people prefer to buy gold and silver on Dhan teras and Diwali whereas South Indians on Akha Teej. Both these festival days are considered auspicious for buying gold and silver in India.
People of India believe that gold and silver bought in these days of the festival brings wealth and happiness. It is almost customary to buy gold and silver on Akha Teej, Dhan Teras, and Diwali.
Infrastructure development in India
Shifting from gold to infrastructure
Indian economy requires a change. Shifting investment from gold to infrastructure will be beneficial for the Indian economy. Change in attitude may benefit India this particular time. It seems that gold price will go down globally in near future. India, China, and the Middle East have been the major buyers of gold in recent years. China has been exporting much and has a huge trade surplus. It has been buying gold out of that surplus. However, its export and trade surplus has also been declining.
The crude price soared in recent past that enabled Middle East countries to purchase more gold. Now the crude price has shown a low of $ 33 (19 Dec. 2008). Fall in crude price has seriously affected their purchasing power. Moreover, Saudi prince has lost huge money in City Bank downfall. IMF has also declared its intention to sell one thousand tons of gold. All these will affect gold demand and its price.
India has accumulated a huge quantity of gold but it lacks in infrastructure. India needs huge investment in infrastructure sector. They are looking for foreign investment in this field that is not likely to come easily. India cannot maintain its growth rate without a huge investment in infrastructure. It also needs to put money in agriculture sector but there is not enough money.
It is better for the Indian government to encourage people to convert their gold investments into infrastructure investment. If they come with a policy for the same it can change the economic destiny of Indians.
Gold and copper deposits found in India
Gold mining and underground gold reserve in India
Indian gold mining history goes to 4000 - 6000 BC. Kolar (Karnataka, India) is the oldest and deepest underground gold mines in the world spread in 8X2 KM area. Though the government has closed this mine due to cost factor in this 3200-meter deep mine, there are about 120 KM X 8 KM area is still unexploited.
Similarly, under earth gold reserves are found in Several Indian regions likes of Goa (Estimated reserve 6000 metric tonnes of gold), Alwar in Rajasthan and Chhattisgarh state. India has 9% of world's total gold reserve according to an estimate.
Australia has been doing extremely well in exploring and producing gold since 1980. It has already produced more tan 3700 tonnes of gold and has estimated reserve of 4600 more tonnes under the earth. Now Canada is following the same path. However, the process of exploration is very slow in India and despite huge reserves, the country is not producing much of gold.
Geologically India is part of Gondwanaland as Australia. Hence, there is a high probability of finding more gold reserves. Large numbers of geologists worldwide believe that India may have 20 percent of estimated hundred thousand tonnes of underground gold reserve.
New and effective government policy, enthusiasm and opening up investment in this sector is required along with the application of modern technologies to be a big producer of gold. Having been done these, India may convert from an Importer to an exporter of gold in the future.
Process of excavating and refining gold
Gold, Jewelry and economy in India
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