India is crazy about gold. But can the love last as prices skyrocket?
- There has been a downturn in demand in the world’s No 2 market for gold amid a slowing economy and a cost spike of almost 25 per cent this year
- The yellow metal is a fixture at weddings and festive occasions, and has long been a safe and profitable investment option for millions of rural Indians
With their daughter’s wedding set for next February, Janaki and Venkataraman Iyengar needed gifts and silk saris for the big day. Their search took them to Kanchipuram, where they had big plans to buy the finest hand-woven silk clothes and as many shiny ornaments as their money would buy. Only when they arrived did they realise there was a problem: the price of gold had rocketed.
This was something of a sucker punch for the Iyengars, a middle-income couple who had saved for years for this moment. They had planned to gift their daughter 20 pavan of gold (160 grams), in various ornaments, and had managed to set aside 550,000 rupees (US$7,680) from their life savings to cover the cost. This alone was a big ask of Venkataraman, who works at a vehicle service station and makes 30,000 rupees (US$420) a month. But with the new prices the couple were quoted in Kanchipuram, they would have had to shell out an additional 200,000 rupees (US$2,800) – a prohibitive expense, given that the gold price is just one of the many wedding-related expenses they face.
The steep rise in prices is hurting demand in India, the world’s No 2 market for gold, behind China.
In most parts of the country, it is traditional for the bride’s parents to pay for most of the wedding expenses. Gold ornaments, which hold a heavy cultural significance, form an appreciable portion of this expenditure. Now, the Iyengars are unsure as to whether they should limit their outlay to expensive saris, or take a loan to procure gold and jewels.
“We can’t do much about it. Essentially, our family’s reputation and daughter’s relationship with her in-laws depend on it,” Venkataraman said.