Indians buy a lot of gold is actually an understatement. They not only do it in truck loads, but also take immense pride in it. I am yet to find a reasonable answer to why would they buy 1000 tons annually spending $35 b. In Rupee terms, at a price of Rs.26,987 per 10 grams, the cost is Rs.2,698.70 b. That's the Indian enigma.
For them, the opportunity cost of cash, stuck in this bad investment, is hard to contemplate. Yet, this cost appears to be much lower today because the prices have fallen in the last 5 years.
The stream of cash flows, both in magnitude and consistency, they could have received in return from the investment made in any other (cash-flow generating) asset would have been impressive. It would have made them richer, and continued to do so.
I have already mentioned how bad gold is as an investment earlier, and need not repeat it again. Nevertheless, it does not stop me from musing about it.
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