India, along with China and the U.S., they account for 60% of the world gold coins and bars demand in the world alone, according to the latest report of the WGC. Also, India and China solely represent 62% of the world’s demand on jewelry. India is in deep love with physical gold, which is almost a universal well-known fact. How the Indian investment in gold works is what we will discuss here.
Starting with some numbers, according to the WGC report of demand on gold in the first quarter of 2013, gold as investment decreased this year. But this decline was merely due to the fall in the ETF market. While the demand on gold bars and gold coins surges this year making a new record this this quarter. Also, the year over year jewelry demand increased 60.2 tonnes, with a 12% rise. Note that the East in general considers gold jewelry an investment.
The whole world experienced a gold rush this year. In Australia, buyers waited in 500 meter line to buy minted gold coins. The U.S. Mint suspended sales on 1/10 after the demand surged. While India and China ran out of gold in a single day, and there are months waiting list to purchase gold coins in Asia.
The Indian investment in physical gold is expanding, more than other parts in the world. The Chinese investment is rising rapidly too, but India still have the lead in this race. The Indians buy gold jewelry franticly, yet another type of physical buying of gold in India emerges, which is gold coins.
Indians buy the most famous gold bullion coins, like British sovereigns, South African Krugerrands, Canadian maples, American eagle gold coins. Some other Indian gold coins are also sold. The latest gold coin to be issued is Sachin Tendeulkar gold coins released in the Indian holy festival Akshaya Tritiya earlier this May. Some gold jewelers and craftsmen make their own gold coins. These types of gold coins are less popular, but still selling good.
The main reason behind the absence of Indian gold coins is summarized in one word: recycling. Old Indian coins were probably melted and then used in making new jewelry. As sad as it might seem, this experience and workings made the Indian jewelry craftsmen the most famous skilled jewelry makers in the world.
The most popular of bullion coins sold in India is the British sovereigns gold coins. Maybe they are popular because the strong relation between India and Britain after centuries of British colonization of India. This colonization left its strong influence on the Indian culture, and the Indian culture did the same the English culture.
The most important things Indian gold investors look for in gold coins are the purity (karats) and weight. Gold coins weights available in India are 4, 5, 8, 10, 20 and 50 grams mostly 24 karats. The most popular weights are the 8 and 10 grams coins. Maybe they are due to their relatively lower prices, and their mediocre premiums.
Indian gold investors doesn’t concern themselves with rarity or craftsmanship, maybe because the abundance in skilled gold craftsmen in India. Also, this great country is one of the oldest civilizations, which makes a 300 years item is pretty common for a regular man. The passing of time losses its value eastern street-cultures in general, as these people have culture and civilizations lasted for thousands of years.
Gold paper market is important to the Indian culture only because its effect on the physical market. They invest in gold futures and ETFs only if it has some connection with physical gold. The most popular gold ETFs are those backed with physical gold, such as SPDR Gold Trust, the largest gold ETF in the world. While investing in gold futures are for the sake of securing gold used for jewelry, coins, bars and technological industries.
To sum up, India trusts the physical gold, but this large country doesn’t mind investing in the paper market as well, as long as it is connected with physical gold. They buy any form of physical gold, be it a nugget, an ore, a coin or a bracelet. As long as an item contains gold, they are interested in it.