By Uma Shashikant
My friend’s daughter complained about her mother’s obsession with jewellery. The young girl is getting married next June, the only child of doting parents. The mother insists on buying about a kilo of gold for the daughter.
Wedding projects have become an obsession for many upper middle class Indian households. Pre-Covid, celebrations had reached great heights with destination weddings, designer clothes, excessive food and a long guest list. Now that much of it is not possible, the obsession with clothes and jewellery remain.
It is amazing how the jewellery consumption pattern of Indian women have changed in recent years. Old and traditional pieces of jewellery have returned. Chunky and large seems to be the theme. Women move around like mannequins decked in layers of jewellery. The problem is when these ornaments move from inexpensive costume jewellery to real gold. Many women insist on it.
My friend has rediscovered the long chain strung with gold coins. She wants her daughter to wear one at the wedding with 100 coins strung together. Then a dozen bangles per hand. And a waistband that is gaudy, but according to my friend, indicates their new wealthy status. The young girl is sulking.
The girl is a doctor who lives and works in New York. She is marrying an American classmate she has dated for nearly 10 years. She is already nudging 30 and isn’t the young and eager bride her mother imagines her to be. Her problem with all these jewels is that she is unlikely to wear or use any of them. At Rs 50,000 for 10 gms, the mother’s grand plan will lock Rs 50 lakh in a wasteful investment.
Why do families make such investments? Why is it that they do not consider it wasteful and useless? Why has the consumption of gold gone through the roof in India?
The last 30 years of post modernisation prosperity generated a swathe of the newly rich in India. Sadly, many of these incomes were in cash and needed to be hidden from the tax man. Gold and real estate were the two options for cash hoarders. Both markets hit the roof with demand from cash earners.
The demonstration effect of this consumption by the rich meant that the rest of society that needed to belong to this class, also began consuming gold in large quantities. Weddings became the showpiece of the family’s wealth and jewellery worn by the women an indication of that opulence.
There is also the traditional attachment to gold as a preferred investment. That was a valid argument in the olden days when it was convenient to divide the family wealth between sons and daughters, by offering streedhan to the daughter at her wedding. Gold was also easy to pawn in a cash crunch. Even a poor household found it worthwhile to hoard some gold for emergencies.
A combination of traditional and cultural practices, preference for a physical asset, and the widespread gaudy exhibition of chunky gold jewellery propelled the obsession.
We have come a long way from all this. The mindless pursuit of gold as an investment needs to stop, so that families pass on wealth sensibly to the next generation. The young doctor is bewildered at the possibility of owning and protecting so much gold, which she is unlikely to ever use. The mother shuts her up saying she does not know.
The young girl knows a thing or two about assets and investing. She knows that gold is an idle asset and what she holds as jewels will yield nothing. The primary case against overdoing gold is that it does nothing but simply sit there.
Gold yields no income. No dividend or interest. It is not even like other assets that will be productive. Money invested in gold is money hoarded. The only claim to fame for gold is its merit as a store of value. Imagine a dire situation when you have to leave your home and run away as refugees to another land. What would you take with you? Nothing except gold will have international currency and help you remake your life anywhere in the world. Gold is a store of value, quite reliable at that.
But that scenario is a desperate one, fitting perhaps to olden times of war and plunder, loot and displacement. Gold prices still respond to desolation and crisis in world markets. Any uncertainty in asset prices and the future, gold prices move up. But beyond being the asset for distress, gold has nothing to claim for itself.
The real wealth in the world we live in, is in the many productive businesses and enterprises that have sprung up around us. They are testimonies to the power of human imagination and ideation. The world we now live in generates wealth not from hoarding or looting but a far more democratic process of productivity and profit. Where is the place for gold in that schematic?
My friend’s investment in gold will not yield her daughter any benefit. Worse, selling the jewellery will be cumbersome. Jewellers in India recover steep charges called making charge and damage. Making charges can erode 10-15% of the value of the jewellery. Damages can be another steep cut. Buying and selling the asset is an expensive proposition.
There is the added burden of heirloom jewellery. My friend has some jewels handed over from her grandmother’s times, that she cherishes. She won’t ever sell them. Nor will she let her daughter sell them. Thus these assets are nothing but pieces of ornamentation, worn by women as part of their beautification objectives. Let us not raise that needlessly to the status of an investment.
Pause to consider whether a well educated girl, who will be earning millions from her profession during her lifetime, needs a hoard of gold as an indicator of her value? How laughable is that proposition! Many youngsters do not even want to partake in the wealth and earnings of their parents. They prefer to begin their lives from scratch and build it up. Why imagine the need for a crutch?
The young girl believes wealth should be used and enjoyed, not hoarded. Fly business, she told her mother who promptly replied— that is such a waste of money. What irony!
(The writer is Chairperson, Centre for Investment Education and Learning.)