The seductive lure of the precious yellow metal can make fools of us all

Poor Midas, the mythical Greek king who had, literally, the golden touch. The boon granted to him, that whatever he held would turn into the precious metal, all too soon proved to be a bane as he faced starvation when his food and drink were transformed into uningestible bullion.

Despite the cautionary tale of Midas, the world continues to be deceived by gilded ornament, to paraphrase Shakespeare, and persists in its headlong pursuit of the barren metal which serves no useful purpose and is prized only for its rarity value. And no one prizes gold more than we Indians do. In the financial year 2021-22, we spent $46.14 billion on gold imports, an increase of more than 30% over the previous year. This figure represents only officially sanctioned imports, and doesn’t take into account smuggled gold.

One of the persistent problems with India’s economy is our current account deficit (CAD) – the amount by which the value of our imports exceeds the value of our exports. That is expected to touch $105 billion this fiscal.

If we were to get over our obsessive craze for gold, our CAD would go down drastically, and our economy would be stronger. The foreign exchange we would save by not importing gold would help us cope with economic shocks better.

So why do we hanker so much for an unproductive piece of metal which is good for making blingy jewellery and not much else? The reason is economic insecurity. When insecurity increases, as it did during the pandemic, the demand for gold goes up because of the completely irrational, and enduring, value the whole world accords to Au, the scientific symbol for the metal.

This leads to a vicious spiral. The more we divert scarce economic resources to gold from productive investments in industry and other forms of employment generation, the more our economic anxieties will increase, leading to yet more expenditure on gold, and so on, ad absurdum.

Absurd as it is, the global gold rush continues, a chase after something of less practical use than cow dung, which can be used as cooking fuel and fertiliser.

In another story of Midas, the king grew a pair of donkey’s ears. Not surprising. Gold makes asses of us all.



Views expressed above are the author’s own.


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