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Will India Stop Buying Gold?

Rashmi: Gold and silver are firmly embedded in cultural and religious traditions for Indian women. Over the past decade, Diwali and Akshaya Tritiya have become major gold- and silver-buying occasions in India. Gold and silver also play an important role in the marriage ceremony, where brides are often adorned from head to toe in gold jewelry. This reminds me of my own wedding.

[Rashmi is wearing approximately 500 grams of pure gold (about 17.6 ounces), including a necklace, earring, a tika and matha patti on her head, haath phool in her hands, bangles on her wrists, nose ring, arm band (bajubandh), and finger rings.]

So during wedding season, the demand for gold and silver increases. Our women customers prefer lightweight jewelry instead of heavy and bulky ornaments. Increasingly, it also appears they now prefer workmanship over weight when choosing jewelry made from gold. The Indian custom of women wearing jewelry has not changed, though they have started accepting 14 carat gold in order to make it more pocketbook friendly. And people in India wear jewelry to all kinds of parties.

We have also experienced an increased number of women customers in our shop. They still buy gold and silver jewelry, but now they prefer jewelry that is of designer quality and looks good. This is the biggest change I have noticed with women over the past few years; they want jewelry that is unique. They prefer wearing long earrings – danglers or hoops.

They also prefer multipurpose or conceptual jewelry – in other words, jewelry that can be worn in different ways. This attracts the woman customer, as they think they have more jewelry for the same price.

There is a different culture in south India, where the people are more bound to gold jewelry than silver. The parents still focus on giving gold to their daughters for a wedding present. Each part of India has different customs, but the one thing that remains common is that gold jewelry is bought by everyone for weddings.

Jeff: Ashish, you’ve stated you are very bullish on the price of gold and silver, and that a bubble for prices is ahead; why?

Ashish: To be clear, we are extremely bullish on the price of silver and gold. We believe that both will eventually advance into a full-fledged bubble that will surpass most investors’ wildest dreams.

The world is changing and so is the way we invest. Gold and silver were once considered a marginal investment, worn mostly as jewelry or something that was stored in banks. Now it is making a comeback and has become a primary investment asset for many individuals and institutions.

In India, people are very futuristic and are so bound to the culture that they’re buying gold and silver in advance. If they know that they are going to marry their daughter in three to four years, for example, they will purchase the gold now instead of waiting when prices will be higher. This will continue to underpin demand and push the price higher.

Jeff: Any other trends you see in India?

Ashish: From the average layman to the high-class educated person, they now want to invest in gold and silver. In fact, those who were investing in equities have been switching to gold and silver. Even the gold and silver ETF has become common in India. This is partly due to rising prices; keeping metal at home has become riskier, so they can avoid the risks of self-storage by using an ETF.

Even I have invested in gold and silver for my personal use apart from my business. Instead of buying equities, I now invest more in gold and silver, with the expectation of getting a good return.

I will conclude by just saying that based on what we see here every day, we believe gold and silver prices will continue to go up.

Jeff: Thanks, Ashish and Rashmi.

[For more on developing trends in gold and silver, download the free Casey Research 2012 Gold Investors Guide. Reading it will help you refine your precious-metals investment strategy and increase your wealth.]

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