Do you know why Indian buy many gold? Gold in India has traditionally been a form of Stree Dhan, a security that a woman gets from her parents and passes on to her daughters. My grandmother would give a little money every month to her jeweller and when it had saved up to something meaningful, she would have a little trinket made or necklace ordered for her daughters. Over time, while the tradition has continued, it has also become a mark of social status. It continues to remain one of the highly 'socially regarded' asset classes (next to real estate perhaps) and perhaps much of its appeal comes from its power of display.
It is only in the last 4-5 years that gold has earned a reputation of ‘high return asset.’ And somehow, we tend to believe gold prices are always going to keep going up (we'll see this a little later in this post). Now the problem is that gold jewellery is among the worst forms of 'investing' in gold. Gold jewellery is expensive as an investment. In gold jewellery, what you pay for buying the jewellery includes the costs of making the jewellery. When you go to sell the piece, some costs of melting are deducted by the jeweler. All these costs can take away up to 30% of your gains, thereby taking away much of the sheen from gold investments.
So at best, our reasons for buying gold continue to be dominated by the reasons mentioned above, more than any global economic anticipation.Read More.