Gold at ₹1.3 Lakh and My Grandmother Is Not Selling

Gold has more than doubled since my grandmother last bought any. I asked her whether this was the time to sell. She looked at me as if I had asked her to sell the house.

A price nobody predicted

This Dhanteras, 10 grams of 24-carat gold cost around ₹1.3 lakh in most Indian cities. In 2019 the same amount cost under ₹40,000. Gold crossed $4,000 an ounce for the first time this month, driven by central banks buying it as a reserve, worries about American debt and a weaker dollar. For Indian buyers, a weaker rupee added to the rise.

Jewellers in Anand told me footfall was lower than last year, but the value of sales was higher. People are buying lighter pieces, coins instead of necklaces, or exchanging old jewellery for new instead of paying fresh cash. When prices rise this fast, the habit of buying gold at festivals does not stop. It just shrinks to fit the budget.

Why she will not sell

My grandmother owns a few bangles and a necklace, most of them bought when she married and added to over the years. On paper they are worth much more than she paid. I suggested, partly to tease her, that she sell a bangle and put the money in a mutual fund. She refused immediately, and her reasons were more practical than sentimental.

She remembers years when the bank felt far away and paper money lost value quickly. Gold, for her, is insurance. It can be pawned in an emergency, it is accepted everywhere, and it does not depend on any company or government doing well. She is not trying to maximise returns. She is trying to make sure that whatever happens, the family has something.

What an economist would say

An economist would point out that gold pays no interest and can fall sharply, and that a family with most of its wealth in jewellery is taking a quiet risk. That is true. It would also point out that Indian households hold one of the largest private stocks of gold in the world, which is a big reason India imports so much of it and why gold buying affects the rupee and the trade deficit.

Both views can be right at once. For a young saver, gold makes most sense as a small slice of a plan, perhaps through a gold ETF rather than jewellery. For my grandmother, it is the plan, and at her stage of life that is not unreasonable. The price of gold tells you what the market thinks it is worth. It does not tell you what it is worth to the person holding it.