Even though 2021 saw a decline in sales, gold is still popular. India is the second largest yellow metal buying country after China. The share of both Asian countries in global demand is almost 50%. Yellow metal is not mined in India, so precious metal has to be imported. Last year, the import of precious metal into the country reached a record $55.7 billion in monetary terms. That's up 2 times from 2020 and $1.8 billion above the record set in 2011 ($53.9 billion). In physical terms, the South Asian country imported 1,050 tons of yellow metal, the highest in the last 10 years.
Gold plays an important role in the cultural and economic life of Indians. Yellow metal has had the status of a sacred object for millennia, so Indians do not stop acquiring gold jewelry. They like to buy precious metal in honour of special events such as Diwali celebrations, Akshay Tritiya, Ugadi, Goody Padwa, weddings and throughout other favourable days of the year. According to the World Gold Council, about 23.5 thousand tons of gold are stored in Indian households, and about 4 thousand tons are stored in temples. In addition, about 745 tons of gold are in the country's state reserves.
India knows that gold can provide financial security. The pandemic has strengthened the Indian population's commitment to yellow metal as rising prices for it in 2020 have helped many people through crisis times. They could use precious metal as collateral for loans. India's strong gold import figures for 2021 are evidence of robust global demand. Indians resumed weddings and increased purchases of yellow metal after a decline in the incidence of coronavirus and easing quarantine restrictions. The population bought precious metal even despite the rather high average annual price of $1800, which indicates the security of the middle class in the country.
Low volatility and high gold liquidity
Some investors may get the impression that the price of precious metal has high volatility. However, this is not the case. If you look at the dynamics of the course from 1971 to the present, you can find that its cost increased much more often than decreased. In almost 20% of cases, the gold exchange rate by the end of the year increased by more than 25%. In 1971-2021 the cost of precious metal increased annually by more than 5%. Since 2000, the gold exchange rate has grown by 86%. Dragmetall has the lowest annual exchange rate volatility compared to alternative assets such as bitcoin, real estate investment trusts, agricultural land, etc.
Investors considering the option of increasing their position in the gold market should pay attention to the high liquidity of the yellow metal. According to the latest report from the World Gold Council, precious metal ranks 3rd in the ranking of highly liquid assets in the world after the "S&P 500" and US Treasuries. Global yellow metal trade averages $100bn per day. In general, these two qualities of gold - low volatility and high liquidity - can increase the return on investment portfolios, adjusted for risk. According to experts, investors' investments in yellow metal should be 10-15% of all assets.