Eternal Glitter

 INDIA’S OLDEST SCRIPTURE, the Rig Veda, has a hymn to Prajapati, the lord of creation. The translation by Ralph TH Griffith goes: “In the beginning rose Hiranyagarbha, born Only Lord of all created beings. He fixed and holds up this earth and heaven.” The god is the first to exist, but how does he come about? As a golden embryo, the meaning of Hiranyagarbha. Picture the Vedic composer then, a sage belonging to one of the priestly clans, with his eyes closed as he runs through the lines in his mind in the middle of a sylvan forest, wondering what to make the embryo out of. What is it that will most please the god when he sings the hymn? Gold, of course, and there are reasons for it. The metal is pure. It doesn’t tarnish. It radiates colour, and when worn, makes the wearer radiate. It is not as if gold became desirable around 1500 BCE when the Rig Veda was being composed. Long before that, other civilisations were obsessed with it and you could probably trace it to even earlier. Man conquered the earth through the making of fire, and would not gold be just like fire in appearance when they discovered it?

There is more than purity making it coveted. The metal is also rare, with only a limited quantity existing on the planet. Take all the gold in the world, and it would be a cube inside four large swim­ming pools. Ownership of such an element, so scant and with so much effulgence, says something about the owner—he has stat­ure because he can afford its possession, he has taste because it adds to his personality when worn. This can take unusual forms even now. Gangsters of the Mumbai underworld have a tradition of adorning themselves with gold chains and rings. Remember the layers of necklaces on Circuit, the sidekick to Munnabhai? Film­maker Raju Hirani was merely digging into that phenomenon.

There is also a key reason that ties all the allure together. Gold’s value might go up and down in the short term, but over time it increases. Whoever owns it gets wealthier doing nothing. Nowa­days, if you have money, you put it in a fixed deposit that gives you an interest every year. Money must lead to more money because the price of goods that it buys is rising. Before modern financial instruments, what could ordinary people do if they had to keep up with inflation? Coins of kings became worthless as they were debased. Gold, even in whatever one could afford, was the hedge. No one had to spell it out; human beings across cultures and con­tinents knew it instinctively.

They found ways and means to own it, and society encourages it through norms. There is, for instance, the practice of dowry where it is almost mandatory that some component must be in gold. If the bride retains control of it, not always a given, then it is the security that she pulls out when the family is in distress. Or when her daughter is married off, the same gold is given forward, turning that security into something that moves across genera­tions. On festivals like Deepavali there is a religious push for peo­ple to buy gold. It becomes an unsaid exhortation for households to save through the year to make a purchase during this period.

NOW THERE ARE modern routes for people to purchase gold even with very little capital. Mutual fund companies have Exchange Traded Funds (ETF), where they buy large quantities of gold, store it, and sell units of digital paper to the public in proportion to the gold. Every time the price of its real gold increases, so does the price of the paper that mirrors it. The first such ETF in India was launched in 2007. A unit cost ₹9. Today it is ₹105, almost 12 times. Gold’s price is now at a historically high level. Ten grams cost a little over ₹1,30,000. It was around ₹7,000 twenty years ago. The number of middle-class and even poor households who have painstakingly accumulated it are wealthier because of it. But most will still not sell it unless absolutely necessary.

Gold is a security against the uncertainties of existence, not just at the level of individuals but also institutions and countries. This hedge is happening right now at the grandest of scales as the economic stability of the world is shaken by the return of Donald Trump as US president. Norms that kept the order are unravelling. When tariffs are unleashed by the US as a geopolitical weapon, the response by other countries has been to increase their gold reserves. Russia and China, adversaries of the US, have been do­ing it. India, which is not an adversary but has found its faith shaken, is doing it too.

To take another example, consider when the world was run over by a pan­demic and went into lockdown. Gold be­came a safe harbour. A paper published in the International Review of Economics & Finance in 2024 titled ‘Gold in household portfolios during a pandemic: Evidence from India’ found a correlation between it and the impact of Covid. Relying on a survey of 142 districts across India dur­ing 2020-21, they found households in districts with a higher incidence of Covid making a greater shift to gold in their portfolios, as compared to other districts. The paper said, “A similar shift towards gold is observed for districts that experienced the most adverse economic im­pact—as measured by lower night-time lights intensity—dur­ing the pandemic.” Covid was also a time when the sagacity of owning gold became evident. Out of work and with no stream of income, people used their gold to take loans to survive.

Even in dire circumstances, Indians would rather pawn their gold than sell it. To give it up is seen as a foolish thing. When the country is forced to do it, radical changes can happen. In 1991, India found itself near bankruptcy and had to sell and pledge close to 60 tonnes of gold reserves. The image of planes being loaded with gold was so shocking that the entire economy of India was liberalised to prevent such humiliation again. It led to an unleash­ing of entrepreneurial energies that made the country self-reliant. Every subsequent leap, from the financial to the technological, has been built on that moment.

Many economists and investors foresee a crisis in the mak­ing because of governments spending money they do not have. This is a result of moving away from what used to be the gold standard. Earlier, when a state printed money, it was backed by gold. Citizens knew that there was value in the paper they held in their hands. The connection was severed in 1971 and led to the era of fiat currency. All that the currency promised was trust in the government. With gold not there to check them, govern­ments could overspend with the assumption that it would lead to growth which would make debt manageable. Many of the most developed nations have created historically high levels of debt on their books. The US, for example, has a national debt of $37 trillion. India’s is around ₹181 lakh crore or $2 trillion. In recent times, the consequences have begun to come calling as countries that had negligible inflation, like Germany and Japan, are seeing the rate go up. To meet that, the price of gold is also increasing as nations and people start buying it. Weaning ourselves away from the gold standard has not diminished its role. Should worst-case scenarios play out, of inflation galloping away, gold’s attrac­tion will boom more.

Gold’s price rise has already been ex­traordinary this year, increasing by over 55 per cent from January to date, and Indians are becoming wealthier. A recent Morgan Stanley report estimated that households here have $3.8 trillion in gold because of how gold has performed. Its journey might not be over anytime soon. On October 13, Bank of America Research forecast that gold prices, which have just broken $4,000 an ounce, could reach $5,000 in 2026. Goldman Sachs has $4,900 as its estimate. Should that come to pass, Indians who hold gold will find themselves 20 per cent richer from it. But they will still continue to add a little to what they already have.