Monday, April 22, 2013

#12 : Gold: The "Yellow-Metal" and Indians

My first entry in 2013. And I chose to begin it with Gold.

GOLD! The Precious yellow metal most sought after by women ( Ironically, After the recent 5-year old girl abuse incident in Delhi, I keep wondering if there will be any women alive in this country in future to wear this yellow metal).

Like all Indian Moms having daughters, My mom also decided to go "Gold shopping" after Gold prices began to landslide recently. As anticipated there was a huge crowd when we hit the jewellery shop. We were in the shop for about 3 hours and there was no sign of the crowd receding, in fact it was quite opposite. This mad rush for that yellow metal which is burning a hole in purses got me thinking. Why is gold so important for us Indians?

First.What is gold?

Chemically Gold or Aurum (Latin/Chemical name) as we kids knew it in chemistry class, is a soft, malleable (Meaning it can be stretched into thin wires, literally Hair-Thin)and inert metal. It is not affected by exposure to air or to most reagents.Hence it is not tarnished like silver or does not loose its sheen and can be worn over ages. The purity of gold is measured in units called as Carats. 24 Carats is the maximum level of purity.

Normally ornamental Jewellery is 22 Carats, i.e. 22 parts of gold, 2 parts of other metals like copper/rhodium/silver/zinc/cadmium. In chemical terms, ornamental jewellery is not pure gold, rather it is an alloy of metals. Hence after prolonged use, Ornamental gold changes color from dull yellow to slightly reddish yellow.

Okay now that we know the Chemistry of gold. What is the history behind it?  Why are we Indians so "gold-crazy" (by standards! My standards to be precise :P)

Gold is the symbol of Hindu goddess Lakshmi.The Hindu God Brahma is referred to as Hiranyagarbha which means born of gold as he is born from the cosmic egg of gold. In Hindu mythology, some of the gods and goddesses are described as golden hued with reference to their beauty. Given that majority of Indians are Hindu, Gold thus symbolizes prosperity and hence the tradition of giving a women gold when she is married off. Yes, I agree. Gold is the best asset that can be liquidated easily for instant cash when in dire need.  But trust me these days people are truly insane. Kilos of gold?Honestly! Its give me migraine just to think how to safeguard all that gold.

Also there has been many historical references to gold being used as currency without denomination till the 6th BC Century and with denomination since the 7th century BC till about the Mughal Invasion in India, where in Sliver took over as replacement. There are historic evidences that show that gold coins may have introduced somewhere between 2500 and 1750 BC.
It is also to be noted that many Indian kings stashed away riches majorly in the form of Gold. Biggest Example : The recent Excavation of Padmanabaswamy temple in Kerala. Read more about it here :

We now know the history and chemistry of gold. Then why is this metal so expensive even in the form of bars and coins, leave alone Ornaments?

Gold is a relatively rare element, making up only 0.000 000 4% of the Earth’s crust (by mass). You would need at least 250 twenty-tonne trucks full of the earth in order to recover just 20g of gold; that’s a cube of gold with approximately 1cm sides. Gold is valuable simply because it’s scarce and difficult to extract.However, gold is by no means the scarcest or even the most expensive metal. Yet, the process of extraction, purification and separation ( And a whole list of another -tions as my chemistry books once suggested) just adds up to the insane cost. Plus excavation for over a period of time has depleted the sources.

Now to the Billion Dollar question. To Buy or not to Buy?

1.Gold has proved to be a good investment so far.Gold prices have been steadily increasing for a long time. The latest downfall is a rare phenomenon. Hence the rush. Here is a little history of gold prices

Gold Historical Prices
So now you know why gold is a good investment.

2. Gold Ornaments : I really don't have a liking for Gold Ornaments. Read on why

The thing with ornamental gold is that, jewelers charge anywhere about 6% to 20% on wastage and 3% to 11% on making charges. The more intricate pattern the more are the wastage and making charges.
But why do they add this "Wastage" along with the justified making charges (after all it takes some skill to craft beautiful jewels!) ? When a bar of gold is alloyed and cut into intricate patterns  fine dust of gold falls off. This dust cannot be reused most of the time. Though the quantity of dust generated may be of considerate amount and also for a fact that gold dust is consumed in some parts of the country as medicine, Still, Waste is waste and "gold waste" still carries the cost of gold. Hence the Wastage Charges.

if you want to buy something like this be ready to empty your  bank accounts!
Stone jewellery are a different story all together. Jewelers charge for the amount of gold displaced to place the stone over the gold base and they also charge for the stone that is placed. Thought the sheer beauty of a stone necklace is unmatched. Yet. These days there are better imitation jewellery with a variety of designs and price range. 
And frankly I simply wonder how people can buy 100 sovereigns of gold ornaments and wear the same old jewels all along life. 
Hence buying few pieces worth about 25 sovereigns is more than enough to "flaunt".

3. Electronic Gold a.k.a Gold stocks

I am in love with this concept! Reason : They aren't actual physical gold. They are stocks which are traded in line with prices of gold. Hence there is no worry of Gold quality degradation and the very obvious threat of gold being stolen. With the number of gold theft cases increasing, I personally feel gold stocks are best bet to have a peaceful sleep even if you technically own 100 sovereigns of gold!

VERDICT : I am no Economist. I am no Genius. But I am a girl. I do have a liking for beautiful gold Jewels ( Thought not this crazy kind of liking). I would probably buy some nicely crafted pieces for upto 15 sovereigns and then keep buying imitation pieces as when the trend changes. I would also invest in about 10 sovereigns of gold coins/bars just in case a need for quick cash arises. My best bet would be on Gold stocks where i'd put my money on. But I'd tread real careful with the gold stocks, for stocks are double-edged swords. 

DISCLAIMER : This was written purely on an impulse after spending4 hours to pick a gold ring weighing just 4 Grams and bill in the highly crowded Jewelry shop ( Yeah, GRT!) In my state of mind you would probably give up buying gold jewels.    


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