In this article for The Northern Miner, I examine why Indians buy gold and why the usual Western explanations often miss the point.
Gold is not merely a matter of tradition, weddings, or culture. In India, people buy gold because much of the economy offers negative real yields. Once inflation, currency depreciation, corruption, taxes, bureaucracy, weak property rights, and institutional distrust are taken into account, many conventional investments fail to preserve wealth. Gold becomes a rational way to lose the least.
I also argue that this Indian experience is increasingly relevant to the West. As Western economies become over-regulated, overtaxed, debt-burdened, and financially repressed, gold may once again become attractive not because it yields anything, but because no yield can be better than negative yields.