As the U.S. and EU are panicking at the volatility of their stock markets, gold continues to skyrocket to record highs – last week crossing the $1,800.00 barrier. Indian consumers, by virtue of its culture and gifting tradition, have already benefited from this investment.
During the holidays of Diwali, the tradition of giving small gold gifts has long had an impact on the gold market. Now that investment in gold, as part of the Indian cultural fabric, has helped raise tide, and with it all boats.
Now the reasons for gold’s meteoric rise are complex, but largely rooted in the economic uncertainty of the U.S. and EU markets. Gold has long been regarded as the safe haven. It’s utility in electronics, the difficulty in mining it, and it’s attraction as a primary element in jewelry will always provide consistent demand.
India, the world’s biggest gold consumer, typically sees demand for gold rise by 40 percent during the Diwali season, according to the World Gold Council. When you figure that the value of gold has gone up 25% this year alone, it bodes well for India’s culture of gifting gold and the increase in net worth of the individuals who bought the gold.
India’s economy has often been described as insular. While this is no longer as true as it once was in the 80s. It has weathered the global economic recession better than anybody. Some attribute this to a distinct fiscal or economic policy. These are certainly the driving factors. But the good fortune of gold’s increase and the fact that it has been such a part of the cultural tradition is certainly helping nudge things in the positive direction.
Be careful, however. Some economists are already predicting there’s a gold bubble, about to burst. If the global economy can make it out of this latest period of uncertainty and if the EU can learn how they are going to handle Greece, Italy…and eventually Portugal, I foresee gold dropping within the next year.
However, if things get worse, India’s cultural tradition will continue to be a great way to celebrate giving the gift of kings, whilst helping India’s economy to grow.