The Switch

wealthymattersIn 1910 the British GOI increased the import tariffs on silver from 5% to 11%. A market report in 1912, by Pixley & Abell, a gold wholesaler, pointed to a 28% fall in silver demand in the Indian bazaars in the three years following the increase. They attributed this to not just a fall in demand for silver due to tax increases, but also a substitution of gold for silver in people’s savings as gold became more attractive on a relative basis.Between 1910 and 1930 net imports of silver in India fell from 98m ounces to 31m, according to British Geological Survey reports. After this time India gradually became the world’s largest gold consumer, a position it finally lost to China in 2015.

Nilesh Shah On Gold @KotakSecurities #KotakMidCapMeet15

wealthymattersPaper Investors have a fundamental difference in thinking from those who prefer tangible assets.
His argument is that as India is the only buyer of gold, the day we all wish to sell, we will find no buyers offering a good price. Banks are prohibited by law to buy-back gold and jewelers have stocked up gold on credit.
My understanding is that, gold sold at the time of large scale distress, such as war or its aftermath, might not get us a good price in any given currency, but gold is “money” that is directly exchangeable for goods and services.
Buying gold is a statement on non confidence in the currency of any given country. And the establishment that devalues it.


And in anycase, Mr Nilesh Shah is wrong on fact. Indians are not the only buyers of gold.

The Immediate Future Of Gold

Gold Price Prediction

So Why Do We Indians Buy Gold?

Losing Money On Gold

The price of gold has tripled in the last six years, giving investors an annual compounded return of nearly 20%. Compared to bank deposit returns of 8% a year and a volatile equity market, it is hard to argue with proselytizers of gold. But gold hasn’t always appreciated year-on-year. In the four years between 1988 and 1992, the price of gold fell every year. Again, between 1994 and 2001, gold prices declined year-on-year. Indeed, in the quarter century between 1980 and 2005, investors in gold lost 11.74% of their capital. The present rise in gold prices, which took off after the Lehman Brothers’ collapse in 2008, may reverse. These are the facts to remember,as you try to decide whether to keep your gold or sell.

%d bloggers like this: