If you haven't noticed that China and India are both buying more gold, you're not alone. Even though the World Gold Council has reported that both countries may reach 1,000 tons purchased in 2013 by the end of the year, a lot of people in the West haven't noticed or really cared. However, all this gold being bought may have consequences for people all over the world in the short term and the long term.
One of the reasons India and China are buying so much gold is cultural. With over half the world's population made up by citizens of these two countries, when national holidays and marriage ceremonies happen toward the end of the year, rural people want gold to give as gifts and to use as a dowry. The government of India is not happy about the increase in gold buying by its citizens and has increased taxes on buying and importing gold on three different occasions, but this hasn't managed to stymie the demand.
Here's a rundown of the other reasons that China and India are gobbling up the world's gold supply.
- Low Prices - The price of gold has gone down due to a number of different factors, and this is one of the reasons that so many people - especially those in rural areas - have been lining up to buy as much as they can. Why they want the gold may differ from region to region, but many like using it as woman's dowry or for religious offerings.
- Economic Slowdown - At least in China where the economy has been slowing for nine out of the last ten quarters, some people see gold as a solid investment during uncertain economic times. The same holds true in India where people believe gold is a strong, long term investment.
Whatever the reason, there's no disputing the fact that China and India have been buying tons of the world's gold in 2013 - at record levels. All of this activity has had an effect on the value of gold in the world market, of course. And this is what has some people concerned. The good news is that as gold lowers in price for a bit, it becomes an even smarter investment.
Unlike paper money or some other types of assets, there's a historic precedence that says gold will eventually increase in price again. From the late 1930s to 1971 the value of gold didn't move very much, but after the U.S. stopped backing their currency with gold, the price shot up and kept going. No one knows for certain where the value of gold will be from one day to another, but given the popularity in two of the most populous countries in the world, there's a good chance it's going to increase over time.
Author’s Bio: Sheila Kurdinger has been interested in Eastern culture since a very early age. Whether he's reading about Capital Gold or looking at the global gold markets, he's always thinking about how he can share the information with a lot of people.