Perspectives from ISB


Puran Singh[1] and Nupur Pavan Bang[2]


This article was first published in the business section of on August 28, 2013


‘Dear’ to people, but not so ‘dear’ to Indian Government at the moment. Or rather, too ‘dear’ for Indian government. The gold has kept the finance minister on his toes since the beginning of this year as continuous measures to curb gold imports have failed to reduce the ‘dearness’ of gold to people.

It is worthwhile to muse why the shiny metal has had an inherent appeal and emotional connect with people since ages.

How much gold is there?

Ever wonder how much gold is there? Let us see. Imagine you have a living room that measures 65 feet in length, breadth and height. Now imagine that it is full of gold. That is it. That is all the gold above ground in the world.

However, if you were to convert this block of gold into a wire of five micron thickness (thickness of human hair is – 75 microns), you would be able to wrap planet earth 11.2 million times. Now it seems a lot, doesn’t it? In other words, you can’t judge a book by its cover.

But besides its metallic properties, there is much more to gold that makes it an obsession to mankind.

Who is after gold?

Kingdoms: Gold has been a reason for wars between kingdoms throughout human history. In 1500s, King Ferdinand of Spain destroyed Inca and Aztec civilisations while looking for gold. While some civilisations were lost due to gold’s pursuit, America owes its discovery to it for Christopher Columbus was in search of route to India and China to find the source of China’s gold when he accidentaly found America in 1492.

Individuals: In 1848, people from across the world rushed to California in hope of securing gold flakes for themselves. Later in 1888, discovery of a gold mine near Johannesburg in South Africa triggered another gold rush.

Economies: Gold became vital part of international financial system in 1870s when, to assert the importance of Gold, all major countries linked their currencies to gold and adopted gold standards.

Central banks: Central banks in the world turned net buyers of gold starting 2010. It serves as a guarantee that governments will redeem their promises and secures the value of local currencies.

Investors: Negative correlation of gold with stock market movements is its most appealing attribute for investors helping them safeguard the investments from market movements. In addition, investors use it as a store of value and inflation free investment.

Who else finds value in gold?

Sportspersons: Gold became a prized possession of sportspersons since 1904 Olympic Games in Missouri, US, that started the tradition of gold medals for winners of games.

Astrophysicists: Scientific value of gold was discovered in 1961 when it was used in a spaceship as a protecting device against radiation.

Pharmacists: In 1985, medical significance of gold was discovered when SmithKline & French, a pharmaceutical company in US, developed a gold-based drug for the treatment of rheumatoid arthritis.

Physicists: In 2001, Boston Scientific, a leading medical innovation firm, invented a gold-plated stent used in heart surgery to allow adequate flow of blood to heart.

Is gold the most valuable?

Platinum ($1,521 per troy ounce) is a more precious metals than Gold ($1,417 per troy ounce)

Yet, Peter Jackson chose to use gold ring as ‘The Precious’ in Fiction Film Trilogy ‘Lord of the Rings’ grossing $2.92 billion which is roughly one third of India’s gold import in a year. There is certainly more to gold than its monetary value.

The religious connect

Gold has a huge religious significance, especially in India, a country with diverse religion and cultures.

Hindus: In Puranas, ancient Hindu texts, Hindu God Brahma is referred to as Hiranyagarbha which means born of golden egg. In Hindu mythology, many goddesses have been described as golden-hued that symbolizes purity and ultimate beauty. Manu, the ancient law-giver to Hindu rishis recommended wearing golden ornaments on specific occasions. Also, Indian mythological scripts describe how god and goddesses rode golden chariots.

Sikhs: Maharaja Ranjit Singh in 1830 gold plated the Harmandir Sahib in Amritsar that symbolized wealth and prosperity.

Christians: According to the Bible, on the birth of Jesus, gold was one of the three items gifted by three wise men on behalf of human kind to symbolise sacrifice and love for God.

Is more gold good?

Depends on whose shoes you are in. If you are an investor who can afford to buy gold at peak prices, Good! But ask Finance Minister and he will advise against it.

RBI does not have enough dollars at the moment to pay for gold imports.

Increasing fiscal deficit, falling rupee, are all being attributed to high gold imports by India, apart from the other reasons. The ‘dear’ metal is costing India too much. But, will that make India let go its obsession for Gold or will it be too much of love lost?

[1] Research Associate, Indian School of Business, Hyderabad (
[2] Senior Researcher, Centre for Investment, Indian School of Business, Hyderabad (