Hiren Chandaria: This is why India keeps buying gold
India remains one of the world’s largest sources of gold demand, yet policymakers continue searching for ways to reduce imports and protect the rupee. Why has every attempt to curb gold-buying fallen short?
In this episode, Hiren Chandaria explains why gold occupies a unique place in India’s economy, culture, and household balance sheets. He explores the forces driving India’s persistent appetite for gold, the challenges facing the country’s currency, and why gold ownership continues to grow despite higher taxes and government efforts to slow demand.
Along the way, Hiren shares what global investors often misunderstand about the Indian gold market—and why the future of gold may depend as much on changing monetary conditions as it does on tradition.
Watch the episode now.
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Follow Hiren Chandaria on LinkedIn: /in/hirenchandaria/
Additional Resources
Hiren Chandaria speaks with CBS MoneyWatch
Hiren Chandaria on global gold demand
Transcript
Hiren Chandaria
India is suffering from current account deficit, trade deficit, and it’s putting a very big pressure on its local currency, that’s rupee. And because of that, they are trying to curb down all the imports which are not productive.
For example, the Prime Minister Modi of India, who is very popular, has come out and said that we should restrict our travel internationally and also not to buy gold for one year. I don’t think so vast majority of people would stop buying jewelry because somebody said so. The only reason why people would not buy jewelry is because the prices have gone too high. So what India has done is it has increased the import duty on gold from 6% to 15%.
So automatically gold becomes expensive by 9%. Club that with rupee, which is currently around 95 to a dollar, and it has been constantly depreciating over a period of time. One of the main reason why this has propped up is the war in Iran, and because of that oil prices have shooted up. So that’s a direct impact, and India imports quite a significant amount of crude oil. Last year it imported around close to $123 billion worth of crude oil, and that’s the largest impact on the fiscal deficit.
Monetary Metals
Welcome back to The Gold Exchange Podcast. My name is Ben Nadelstein. I am joined by my good friend and colleague Hiren Chandaria. Hiren is the managing director of Middle East and Asia operations for Monetary Metals. He joins us today to talk all things India and what’s happening in their gold market. So, Hiren, Welcome back to the show. What’s going on in India’s gold market today?
Why India can’t stop buying gold
Hiren Chandaria
First and foremost, hi everyone. Hope you’re doing great. Thank you, Ben, for inviting and conducting this podcast. Really appreciate. In terms of what is happening in India, India is suffering from current account deficits, trade deficits, and it’s putting a very big pressure on its local currency, that’s rupee. And because of that, they are trying to curb down all the imports which are not productive.
For example, Prime Minister Modi of India, who is very popular, has come out and said that we should restrict our travel internationally, do carpool, and also not to buy gold for one year. Now, as you may know, gold is the second-largest import for India. If you look at the total import bill for India, gold constitutes around 9%. I mean, for the year ending March 2026, it was 9% of the total imports.
That’s the second largest. And what also happens to be true is gold is one of the asset classes which government considers that it can do away with. There is no—I mean, if you do away with gold imports, which majorly sits in the savings or in the lockers of people or in house of people, then it does not add to the productivity or it does not impact the GDP.
So that’s the easiest target. That being said, it’s not as easy as it sounds. India has tried this n number of times in the past and the government has not been successful to curb the gold imports for various reasons, which probably we’ll touch upon during the podcast.
Monetary Metals
And where does this fit in terms of things like jewelry, which obviously people use gold in jewelry, but maybe a dental filling uses gold? How granular is this ban on gold? Is it truly bars and coins and investment-grade gold products, or can you kind of pass the border by importing some gold jewelry? How hard is this import ban?
Hiren Chandaria
There is no import ban as such. So what India has done is it has increased the import duty on gold from 6% to 15%. So automatically gold becomes expensive by 9%. Club that with rupee, which is currently around 95 to a dollar.
In the 1950s, it was around ₹3 or ₹5 per dollar. Now it’s ₹95, and it has been constantly depreciating over a period of time.
So obviously India imports—almost all of its gold is imported. None of the gold is domestically mined. I mean, hardly anything. So we can discount that, and that puts pressure on the rupee. Now, coming to your question about jewelry vis-à-vis bars and coins, India roughly imports anywhere between 700 to 900 tons of gold. Somewhere in between at times 680 tons of gold to 900 tons of gold.
And out of that, of lately, around 200 to 260-odd tons are in bars and coins. Rest almost ends up in jewelry. So jewelry is a very, very, very strong demand in India, and there are cultural reasons to it. We can touch upon that. But to answer your question, yeah, jewelry is a very important factor. I wish nobody touches that.
Even the government’s feel that they can do something with it, but people are not going to stop buying it. For Indians, the question is not if I need to buy gold, it’s like when I need to buy gold.
Monetary Metals
Is there a percentage or is there kind of a number of people who said, listen, President Modi said we shouldn’t be buying gold, so I’m going to cut back? Or is this really an appeal with no bite to it? For example, in the United States, if the president said, hey everyone, just, you know, for a year or two, please don’t buy any foreign stocks.
I’m not sure how many Americans would or wouldn’t do that. What’s it like on the reality on the ground in India? It might be that Modi said, hey, everyone, please don’t do this. What percent of the people in India actually are saying, well, you know, maybe this year we’re going to hold back on buying gold?
Hiren Chandaria
So if you look at gold demand, right, there are two sorts of demands. One is bars and coins, which is kind of a little discretionary where people buy for investment, which people might hold off. But if you talk about jewelry, It’s very difficult for people to hold off. The only reason why people would not buy jewelry is because the prices have gone too high. That’s one of the reasons.
To answer your question, I don’t think so. Vast majority of people would stop buying jewelry because somebody said so. That being said, Prime Minister Modi is very popular and there would be a small number of people who would do that. But I think that’s, that’s minuscule in my opinion.
How gold imports crush the rupee (and boost the dollar)
Monetary Metals
And it kind of feels like the Indian government, they said, listen, the rupee is doing terribly, it’s continuing to depreciate, we need to something to stop the bleeding. So first they tried this gold monetization scheme, which they ended up abandoning. Talk to us about that. Why did that scheme not work? And now they’re kind of forced into this idea of, hey, can we just ask people to not buy gold?
Hiren Chandaria
So gold monetization scheme was very, very interesting idea. However, in my opinion, in my humble opinion, I mean, there are so many experts who have worked on it, including myself, and we have suggested so many things, but I don’t think so they targeted the right audience.
In my opinion, what, what happened is they targeted the jewelry market more than the bars and coins market. So let me explain what I’m trying to say. Indians, especially the fairer sex, likes to wear a lot of jewelry. That is a symbol of wealth. That is a symbol of status. It’s also culturally ingrained. Their weddings—you can’t think of an Indian wedding without jewelry, some form of jewelry, right? It’s almost impossible to substitute that, right?
And now this jewelry is in form of a design and it’s sitting as an ornament. Now, this ornament, people would have emotional attachment to, especially the feather sex. They are emotionally attached to that. Okay, that’s part number one. So it would be very difficult for people to convert the jewelry into gold, melt it, and, you know, give it back. It’s almost always, if you look at Indian jewelry being sold, it’s a very, very dire state when things are coming to, you know, I mean, when there is a family emergency, when there is a health emergency, or somebody’s, you know, that kind of scenario, they think about selling jewelry.
Before that, they would like to lease jewelry, or they like to take loan against the jewelry. So all these things they would try, and they would do all that. That’s the first part of the question. Now, getting into a little complication, right? So the hallmarking, which ensures purity of gold—I repeat, hallmarking ensures purity of gold—is a recent phenomenon. Previously, it was kind of not there.
And because of that, what has happened is jewelers have sold gold which was of lower purity, stating that this is, this is the purity, right? So they would say it is 916, so 91.6% pure gold, and actual purity might be 60, 70, 80%. When this gentleman or lady would go to center and get it melted, they would get worth a lot less. And that we’ve seen a lot of confusion in the system, and there is a trust deficit out there.
But instead of that, if that lady goes to the same jeweler and converts that jewelry into new jewelry, then she would get a better realization. So there are economics for that, and we can get into that a little later. That’s problem number 2. Problem number 3 is Indians have been buying jewelry since last many, many, many generations, right?
So not everything is accounted for. There are not bills for everything. The taxation is an issue. There is vast majority of people who are not pretty sure what would be the tax implications or whether the government knock on their door and ask that, okay, how did this gold come on and how did you get it and all that. So that creates a lot more confusion. So these are the kind of things with the jewelry.
Now, if they would have targeted bars and coins, then it would have been much easier because there are no emotional sentiments attached. And generally people who buy bars and coins are more likely to be doing from a bank with a bill and everything. So that makes sense. So in a nutshell, Gold Monetization Scheme started somewhere in 2015, and till 2025, they accumulated around 39 tons of gold. I repeat, 39 tons of gold.
And that, to my mind, is minuscule compared to the potential the Indian government had to monetize gold. Rough estimates are India holds around 25,000 tons to 35,000 tons of gold—household, temples, all put together—and out of that, you are accumulating around 700, 900, 600 tons of gold.
So that’s, that’s quite significant. And there have been times when India has imported 1,200 tons of gold as well. So, so if you put it into perspective, I don’t think so. It was very successful. And we can come to that later in terms of how it can be modified or what can be done to monetize or to restrict the imports in a good way, which is material, I mean, which, which can have a material impact.
Monetary Metals
And so this gold monetization scheme, it had an incentive where it would pay you to basically deposit gold with the government. Now they’ve abandoned that scheme and now they’ve said, hey, you know, please just don’t do it. Kind of a verbal command. Obviously, if they can only get, you know, double-digit tons by actually paying people, what are the odds they’re going to get anywhere close to that just by asking people? Seems pretty low. So do you think that basically the idea that there will ever be a stop to the flow of the interest of gold into India. Do you think that idea is basically over? I don’t think so.
Hiren Chandaria
That has ever been the case. Even when gold was fully restricted, there was a fully ban of gold that was somewhere between 1962 and 1990s. There were informal channels where India used to buy gold. There is an interesting study. I don’t want to name any country, but if you look at it, the Indian imports, when they were low, one country’s imports were very, very high. And suddenly when India started importing, then this country’s imports dwindled down. So it’s very obvious and it’s a very well-known fact that India imports a lot of gold, either officially or unofficially.
So it’s a choice of a government what they want to do. But if you look at it the other way, there’s a lot of parallel economy running in India, that is untaxed money which is floating in the market, black money, what we call it. If the government wants to show something, then it makes perfect sense that you stop official imports and the parallel money, black money, would chase gold. It would be important in the country, but that won’t impact my official numbers. So officially, my scheme works, my appeal works, everything works. So that might be positive.
Why India’s gold monetization scheme failed
Monetary Metals
And in terms of, you know, having these numbers being juiced, whether it’s the GDP or the value of the rupee, can you explain what actually mechanically happens when someone is buying gold How does someone buying gold in India hurt the rupee? And how does someone buying gold in India hurting the rupee, how does that affect the US dollar? Because there’s an interesting chain of value here that most people wouldn’t understand. Why all of a sudden is the Prime Minister of India telling people, please stop buying gold?
Hiren Chandaria
So when, as an individual, anybody sitting in India buys gold, he does two ways. Most of the gold which is coming to India is imported. And when it’s imported, what you need to do is first you need to price that. I mean, even if you are the biggest player, what you do is you price the gold in dollar per ounce. So once you do that, second thing is you buy dollars. Suppose if I’m an Indian, I’m sitting in India, and if I’m buying gold, then there are two legs which I’m doing directly or indirectly. Either I am doing it, my bank is doing it, or some wholesaler or some trader is doing this.
If I’m buying gold, say, worth $1 million, I need to buy that $1 million. So though I would be giving rupee, but I would be buying dollar. And because India is in such a short supply of dollars right now because of the trade deficits and fiscal deficits, I am eating into the dollar reserves of India, and that has a very big impact. So gold, I’m pricing it in dollar. I’m buying dollars to buy that gold. So though rupee is what I own individually as an Indian, Though I am now a British citizen, but if I was in India and I was buying that, I would be buying dollars with that rupee.
And if I’m buying that dollar, rupee-dollar demand would increase and that would lead to higher dollar prices and depreciating rupee. And that is what is happening right now. And it’s become a very, very acute problem for the Indian economy.
Monetary Metals
It feels like really there’s this cycle that happens, which is there’s an exchange rate between the dollar and some foreign currency like the rupee, the ruble, the yuan, the yen, the peso that slowly over time erodes because the dollar is a stronger currency because of the US economy, because of network effects, because of all these trade deficit reasons.
And the people inside the country say, wow, my currency is depreciating against real goods and services, against the US dollar. I’m going to buy some gold to hedge against that currency risk. But by doing that, like you just outlined, buying gold hurts their own domestic currency. It props up the dollar further and the cycle continues.
What could possibly break this cycle? Or do you simply see this continuing to happen, this debasement of foreign currencies the strengthening of the US dollar and the strengthening of gold.
Do you see there some end to the cycle or is it going to continue happening?
Hiren Chandaria
There are various macroeconomic issues why this problem has propped up, right? One of the main reason why this has propped up is, is the war in Iran, right? Because of the war, a lot of oil supply has gone off and because of that, oil prices have shot up. Right. And if oil prices shoot up—currently, I believe the basket of Indian crude oil has moved up to around $109 or something a barrel from somewhere around less than $70 a barrel.
So that’s, that’s a direct impact. And India imports quite a significant amount of crude oil. It—I mean, last year it imported around close to $123 billion worth of crude oil. And that’s the largest, largest impact on, on the fiscal deficit. So out of around $770 or $775 billion of imports, crude was $123. Now, if crude prices go up, then this thing aggravates.
And I believe India is uniquely positioned right now because the Indian government has been able to manage the relationship with many countries. They have pretty good relations with many of the countries fighting the war. If the Indian government, they are one of the most astute governments, I would say there are a few in the world who you can name on your fingertips, one of them is India.
If the Indian Prime Minister is saying that, I think the war in Iran is likely to continue. So as long as this war is there, India would be under pressure. And if that war is there and everybody knows India is totally dependent on crude oil, for the economy. If that is there, then what happens? Even FDI goes out.
.The foreign direct investment which comes into the—FII flows, institutional investment in terms of short-term, FDI in terms of long-term, all that is drying up. So that becomes a vicious circle, and that is worrying everybody very, very much. Now, what could break this? The break is if crude oil prices taper off, the war ends, then things would again come back to normal because India, the growth story in India is good. There are so many things which are going right.
The government is very strong. The productivity is very high in India. The middle class is emerging. Everything else is positive. But if our dependence on crude oil becomes a little less harming, then India should come back in a very big way because a lot of FIIs and FDI flows will start again flowing in and that would ease off the pressure on rupee. And India would be good. I mean, if rupee depreciates, supports export and it harms imports.
Jewelry, culture, and why Indians refuse to sell gold
Monetary Metals
I want to ask you about this idea which has always floated around, that there is this BRICS alliance between Brazil, Russia, India, very importantly, China, South Africa. So where does this stand, this BRICS alliance? Is this an actual alliance where in times of crisis like today, where India is saying, hey, our economy is getting hit by these crude oil prices, we need some help.
Have the BRICS kind of aligned together and said, hey, now’s our chance to, you know, help one of the member states of the BRICS? Or do you think that that was always just kind of some marketing, some PR, that the actual alliance itself was really in name only? And when in times of crisis there is an actual issue, the member states, if you want to call them that, can’t actually be relied on. Where does India sit in this BRICS alliance? Is it real or maybe not so much?
Hiren Chandaria
So BRICS alliance is real from many terms, and for many terms it’s not. So obviously there is a competition between the BRICS nation as well. So India, China are kind of competing. So there are so many things happening. Well, that’s one part. Second is India has a very strong relationship with Russia, which is supportive, and Russia has a lot of commodities to supply. That’s positive. That way it helps, right?
India has a lot of social capital and soft capital, soft power in the world, which is building, right? It’s building. China is building that, India is building that, and that is really, really helping. But if you look at BRICS as an association, there are so many positives to it, but I don’t think so that would help it a lot until unless BRICS comes out with an alternative to US dollar, a currency to US dollar. I don’t know how that’s going to shape up and how it’s going to go, but that’s, that’s one of the real threats which US is feeling right now in terms displacement of petrodollar.
Monetary Metals
Now I want to ask you a question that’s a little bit out of left field, and it’s about silver. What is India’s relationship to silver compared to gold? Obviously, the gold jewelry market in India is world renowned, but people in India see silver as a monetary metal that you invest in if gold prices get too high. Is it a part of the jewelry sector? Is it its own animal, its own beast? Where does silver sit in India’s monetary metal story?
Hiren Chandaria
One-line answer for that, I would say silver is a poor man’s gold. So it serves all the purpose that gold is serving. It’s used in jewelry, it’s used in all monetary assets, what you can think of. And when gold goes out of the reach for people who can’t afford gold jewelry, then they move to silver. There is one more angle to it. See, if you look at religious point of view, right, there are a couple of days when people buy gold, right?
It’s Diwali, it’s Dhanteras, Akshaya Tritiya, and there are various other things. So if people are not able to buy gold, God is very happy if they buy silver as well. It’s going to increase their wealth, right? It kind of helps support the wealth argument. So it’s treated as a monetary asset and as an ornamental value, which is—I mean, there’s a lot of demand for that. And now of lately, it has increased quite a bit. So jewelry demand in silver is going up. Investment demand in silver is going up. And it is also digitizing. First, there was only a little bit of gold ETFs which are popular. Now silver ETFs have come.
They have become very popular in India as well. So that’s second. And industrial demand globally is also helping silver prices. And I think silver is very, very positive. It looks fundamentally very bullish. I won’t be surprised if you see more silver coming in India and making a little bit of dent in gold demand.
Monetary Metals
So now, Hiren, I want to ask you, let’s say President Modi comes over. He says, I’m just such a big fan of the Gold Exchange Podcast. I heard your awesome episode, you get his ear for the next hour or so. I want you to first tell President Modi and the audience what you would do today to offer something to the Indian gold market that is an innovation, either to the gold monetization scheme, something related to this gold import problem that India is having.
Would you say, listen, just let them buy gold, there’s nothing to be done? Would you try to revamp this gold monetization scheme, Hiren. What would you try to do if you were in President Modi’s shoes today?
Hiren Chandaria
I believe there are two-pronged approach we can take to help Indian government with, with the gold import issue. One is, A, is substitution. And when I mean substitution, I am meaning substitution of bars, coins, and ETFs demand, right? That is, that is one thing I’m thinking about. Why do I say that? See, it’s very difficult to substitute jewelry demand for various reasons, right? What we discussed. But it’s much easier to substitute bars, coins, and ETF demand, especially if that can be converted into jewelry on a later date if required, right?
Now, if you look at India, has been one of the countries where digital payment system, digital assets, digital investments—they have done an excellent job, right? Now, in such a kind of scenario, if you are able to project the actual numbers to people which they understand. Okay, if you go to any mutual fund and if you tell them, okay, if I invest with you, what would have happened if I would have invested 10 years back? What is the kind of money if I monthly, if I would have invested X number of dollars or rupee, then what would the corpus be today?
What would be that amount be today? So such kind of things are completely absent right now in an ecosystem for gold. So for example, if gold has to compound, say, with a 4% lease on gold over the next 10 years, what would be the answer? So that kind of things are not marketed well. So I think that is one thing that you substitute the import. If you substitute the import, what happens? I’m talking about 200+ tons of gold which comes in India and it’s sold in terms of—it remains in bars, coins, right? Only bars and coins. I’m not even talking about ETFs. So bars and coins, if that is substituted, then it happens.
Oil, war, and India’s growing currency crisis
Hiren Chandaria
For that, what you need is you need to market it well, you need to incentivize the ecosystem which is selling, right? And third thing is you need to take all the value chain partners along with you, which currently is, I believe, not being done very properly. So if you take care of your partners, you make jewelers and everybody your partner, you help them substitute the bars and coins to a digital ecosystem where the gold can be leased and made it productive for the jewelry demand.
Currently, a lot of Indian jewelry is coming from leased gold, and international banks are able to do. If international banks are able to do, why not allow the Indian digital gold to do, say, and build an ecosystem around that? So that’s point number one. Second thing is, I would say, rather than like gold monetization scheme targeted jewelry, Instead of that, if you come with a scheme which takes bars and coins, then you are not afraid about purity, you are not afraid about anything else.
It’s much easier to do so. In my opinion, if that is done, that’s a big win for India. If we throw numbers to it, every year India for the last 5-7 years is importing more than 200 tons of gold in terms of bars and coins. India imports around 700-800 tons of of gold. If you are able to reduce that just by import substitution by 200 or 300 tons, then you are left to make good around 300, 400, 500 tons of gold. And if you want to do that, you just need to tap on a few gold monetization bars and coins. So I think that might be a very good solution.
On top of that, you layer it with proper guidelines in terms of taxation—what would happen, what would not happen, how taxation would impact it. So all this, if it puts on a platter to an investor, they would be very happy rather than taking 100 grams today. And they are waiting for their daughter’s marriage, which is 10 years later. If they put it on a gold lease at 4%, then they would have 140, 150 grams in 10 years with the same gold. So they would be pretty happy. And I would be the first one to pick that offer if I get one.
Monetary Metals
So, Hiren, people have now heard you explain you can earn a return on gold. It’s paid in more gold. They’ve heard this term gold leasing from you. Can you explain to someone who’s maybe never heard that gold has a yield or can produce a return or what gold leasing is exactly? Can you explain and break down what is a gold lease and how does it work? How does it pay a yield in more ounces of gold?
Hiren Chandaria
Gold lease is something which is, which is very, very much happening right now with the jewelers. Right. So, for example, if one is to walk into a jewelry shop, and see the jewelry lying around, I’m not talking about the traditional jewelers, but the new-age jewelers, most of that gold is on lease. So every gold store probably would have at least 6 to 7 kgs of gold, and that in Indian terms comes to around ₹10.5 crores worth of capital. So it’s a very high capital incentive, gold.
So what they do is they would say, okay, I don’t need to put in so much of capital just to keep the jewelry on the shelf. What I’ll do is I’ll do inventory financing for gold. And how do I do that? I’ll do it with a bank. So bank would supply me that gold. I’ll pay them X amount of interest on that gold.
And as soon as somebody wants my jewelry, I’ll buy that gold from bank. So that is which is on lease. For example, this jewelry which was leased at, say, 2%, 3%, 4%, whatever percentage. Right. And if I’m able to earn 10-13% on that jewelry, then I would rather sell it and earn that rather than blocking my capital.
Because if at all interest rates in India are very high, right? That’s again one of the other reasons why Indian rupee, as you pointed out during the podcast, Indian rupee depreciates because interest rate differential is high, inflation differential is high, current account deficit is high.
So there are a number of reasons for doing that. But this is a simple explanation of what is a lease. So if we design a mechanism where we are able to supply that gold to the jeweler, it’s sitting on the shelf., and before it’s sold, it’s substituted with other gold. You earn interest on the gold by making it productive. And this is already happening. We are not doing something innovative.
I wish we were, but we are not doing something innovative. What all we are doing is we are substituting the privilege which banks and institutions have, giving that power to a retail investor. Okay, you can also do this. So they can earn. That is a big win. If somebody has to invest 100 grams of gold today, in 20 years he probably would double it just by compounding it over a period of time by leasing.
Monetary Metals
Hiren, I want to take us into a rapid-fire round. So I’m going to ask you questions from all over the map and you can answer as short as you want with just one word or as long as you’d like. So let’s start What is the biggest risk to the Indian economy today? Rupee depreciation. Next question for you. How stable is Modi’s rule? If Modi were to potentially go away, how impactful would that be to India?
Hiren Chandaria
Modi as an individual, it would have a big impact. But as a party, I don’t think so. We have a strong opposition right now to substitute BJP as government.
Monetary Metals
Next question for you. It’s about gold versus silver. Do you ever see a world in India where gold and silver are traded and imported at similar rates, or do you think that gold will always be the king?
Hiren Chandaria
I think gold would always remain the king. Next question for you.
Monetary Metals
What are some of the interesting changes happening in the Indian jewelry market that we should be aware of?
Hiren Chandaria
Indian jewelry market is currently suffering from import restrictions in terms of gold. In terms of silver, it’s even more restricted and higher duties. That is putting a dent in gold and silver jewelry demand.
BRICS, dollar alternatives, and India’s tough choices
Monetary Metals
What about Dubai? Where does Dubai sit in the India story? How important is Dubai to India?
Hiren Chandaria
It’s significantly important. So most of the gold which comes in India, it’s either traded via Dubai, Dubai, London, or any of the Southeast Asian markets. It’s imported via them, Dubai being one of the main hubs. It comes during times when gold is restricted. Dubai becomes more important. I hope you read between the lines.
Monetary Metals
All right, Hiren, next question for you. It’s about digital assets. You mentioned that The Indian economy is really up to speed on the cutting edge of investing with digital assets, digital products, digital gold. What about Bitcoin, cryptocurrencies, Ethereum? Have they taken off at all in India, or are these still kind of an odd fad that’s really hitting the Western markets but maybe not made its way to India yet?
Hiren Chandaria
I think it’s going to take its own sweet time and it’s going to be a long way. People know about it. Few people have invested in it, but I don’t think so. The ecosystem is built for that. The taxation issues and everything else makes it feasible for anybody to do big time in crypto.
Monetary Metals
Next question for you is about taxation. What are the taxes like in India, whether that’s on income, on capital gains, on gold? What’s the tax situation like in India today?
Hiren Chandaria
India has a progressive tax system as an individual. So the tax keeps on increasing as you start earning. And if your income moves above a particular level, it’s pretty, pretty steep. It’s very, very steep compared to global benchmarks. It’s one of the highest taxation if you are reaching that particular level. So that’s one. Gold is very sensitive.
I mean, Indian government is rightly so very sensitive towards gold prices and gold imports and gold bills, right? Import bills. And that’s why they charge duty on import, their customs duty. And that has moved up from 6% to 15% last month. So that’s a 9% increase. So the gold prices move up directly by 9% just because of the duty. So that’s the kind of impact taxes can have in India.
Monetary Metals
What is the average gold investor look like in India? Is it a woman who loves jewelry and wants to add some gold just as kind of a safe haven for the family? Is it men who usually buy jewelry for their wives? What does the average gold buyer look like in India?
Hiren Chandaria
We look at gold differently, right? India, gold is a part of wealth, part of inheritance, part of culture. So Indian, even the poorest of the poor would buy some amount of gold. Almost everybody owns some amount of gold in India. So that’s point number one, because it’s wealth. It’s culturally ingrained. It’s part of inheritance. It’s part of something called Sridhan.
That means when somebody is married, the daughter probably may not have rights to the parental property and everything, but whatever gold she gets in the wedding, it’s hers. Even her husband generally, I mean, not always, but generally do not ever touch that. And people don’t sell gold. So gold is at the very top in terms of the wealth for Indians. And it’s almost impossible to substitute as I think of it.
Monetary Metals
This brings up an interesting question I’ve wanted to ask. In the West, a part of the benefit of owning gold is its liquidity. Any day, any moment, any minute, you can sell it instantly for cash. There’s not a big deficit. Oops, you know, things are closed. Oh, nobody wants to buy gold. There’s a massive drop in the bid. Of course, gold and silver prices can go up and down, but it’s incredibly liquid.
You can almost always instantly sell your gold or silver to somebody at some price versus something like real estate. It might take months or weeks or years to actually sell the property. So because gold is so liquid, it often gets sold first in times of crisis. If there’s a recession, if the stock market goes down, if you have a margin call in the West, you might look around and say, well, I’m going to sell my most liquid asset, especially if it’s doubled in price over the last couple of years.
I’m going to take some gains. I’m going to sell some gold and I’m going to use that to maybe top off my margin here or to invest in, you know, bonds that are falling or stocks that are falling.
But in India, gold is not seen as that asset where, well, you know, when things start to turn down, I’m just going to sell the first thing. Oh, there’s some gold. It’s actually oftentimes the last thing that somebody wants to sell. So is there a one-way street when it comes to gold in India where gold is imported, it’s put into the form of jewelry, it has the sentimental value, the sentimental attachment, and people say, I’m going to do everything I can, second to selling a kidney, to keep this gold around?
So is there a one-way street when it comes to gold going into India that you don’t see in other countries? I think so, yes. And what does that mean for the gold market going forward? If all this gold ends up in India, where does that leave the rest of the world who maybe is interested in gold, but not more than this Indian import demand? Do you think that over time India will be the gold hub because of this one-way street?
Hiren Chandaria
So yeah, I mean, India is one of the countries which imports a lot of gold. You hardly ever see India exporting more than importing. So only gold which goes outside India in jewelry form, which is exported, is because of the artistic value. I mean, Indians make very good ornaments. There is a full ecosystem behind it. There are good artisans, labors, and designers for that gold. So because of that, it goes out.
Otherwise, it’s a one-way street. And there are many other countries where gold has prominence, probably South Asian countries. Where gold is imbibed in their culture and they buy a lot of gold. It’s a one-way street. So I think if the rest of the world has to wake up to it, they have a lot of catch-up to do, which I believe would take years because India has been buying gold since centuries and centuries.
So I don’t think so it’s going to happen overnight. I don’t think so we would have enough of mine supply to do that. And as you rightly pointed out, nobody wants to sell gold in India unless it’s like, you know, it’s a very, very dire state.
So I think the rest of the world would have a lot of catching up to do. And it’s not looked at only investment asset. It is personal wealth, inheritance, status, everything put together. That’s what gold is for India and cultural, religious everywhere.
Silver: The “poor man’s gold” and rising Indian demand
Monetary Metals
Now I want to ask you about China and India. Obviously, the US and China have been having this, you know, maybe not so friendly rivalry at some points. Where does India sit between these two massive players? You’ve got China on one side, you’ve got the US on the other. India seems to be kind of on friendly enough terms with both. But where do you see India going in the future if there is this increased tension between the economies of the Chinese and the economies of the United States?
Hiren Chandaria
I think the answer is pretty obvious to my mind. I don’t think so India would sway towards China. It would sway towards US. But at the same time, India is very, very skeptical of the intentions of US. Because of the way it’s been projecting. So you always keep hearing, right, it’s not in US interest. And India has been very vocal about that. It’s India’s interest that’s paramount for them. So it’s no longer the dominance of one over the other. India kind of manages its relationship quite well.
And I think over a period of time, it’s going to sway towards US, primarily because, you know, you see so many Indians settled in US, so many major CEOs being Indians in US, and India can naturally being a democracy, and it values democracy quite a lot. So it’s going to tilt towards US as we move forward. It’s unlikely to tilt towards China, and where we have burnt our fingers quite badly in the past trusting them. So that’s what I would say. But I’m nobody to comment on global macroeconomics. I’m talking from my personal point of view.
Monetary Metals
Hey, Ren, last rapid-fire question for you, which is about the gold leasing market Obviously, this is an innovation that’s been around for a while. People have been leasing gold in different geographies and different economies. What do you think is going to happen for the future of the gold leasing market? What do you think is going to be the biggest change?
Is it going to be that the rates or the yields that you see in gold leases are going to change? Is it going to be the depth of the different geographies where gold leases are? Is it the digitization of these gold leases and access What do you think is the most important change to the gold leasing market that you see coming?
Hiren Chandaria
So I think the gold is currently—it’s an institutional play. And over a period of time, slowly and gradually, it would—it’s going to become a retail play. More number of retailers would be able to lease gold. And that’s where I think would be the biggest change. And it’s going to—it’s going to spread geographically to other markets as well. So currently the leasing model works very well in the jewelry-centric industry. But as it moves forward, I think it’s going to be more retail-focused, more fintech-based. So that’s, that’s where things are going to change.
Monetary Metals
Now, I want to ask you, as we leave this rapid-fire section, what are some things that people don’t understand about the Indian economy, the Indian gold market that you think would be helpful for investors in the West, in the United States, in the rest of the world to understand? What’s something that we’re missing from places like the US that the Indian gold market and the Indian economy could teach us?
Hiren Chandaria
Okay, let’s, let’s take a simple example. We all talk about inflation, right? It impacts. So what is inflation? Inflation is nothing but the amount of goods and services you can buy with your paycheck, with anything right now. If you have to have gold today, X amount of money and X quantity of gold, Y quantity of gold, right? So with the same X amount of money, if you go 2 years, 3 years, down the lane, you will be able to buy less and less amount of commodities, and your standard of living would deteriorate.
But with the same Y amount of gold, if you converted into money—your money can be your local currency—and that you buy your one month’s supply, then you would be buying more and more. So, and this has held true over centuries. I repeat, it has hold true over centuries.
If you have the same fixed amount of dollar and the same fixed amount of gold accounted for your expenses, then the gold would be better off serving you better to increase your standard of living. And that is what I mean by inflation. So for example, if you have 10 grams of gold in India, that is sufficient for a family of 4 to sustain for 1 month.
And that has hold true since centuries. Okay. When gold prices were $35 an ounce, it was true. Today it’s true. And probably it would be true when gold prices are much way higher in next 100 years. Right. So that is what I mean by holding its purchasing power. And that is what gold has done quite well. So that is one thing which I think makes—I mean, that clicked my brains when I learned this.
Gold leasing, yield in gold, and the future of India’s gold market
Monetary Metals
Now I want to ask you a question that you’re clearly an expert on. You were a host of a panel on the silver market. And I want to ask you about silver going forward in the future. A lot of people say, well, silver has this benefit that gold doesn’t. It has this industrial side to it, this kind of commodity side, more like copper, but it’s still got that monetary demand kind of like gold. It kind of sits between gold and copper. It’s half monetary metal, half commodity metal.
And for some people, they think, oh, that means the price of silver is going to go up over time because it’s got these dual demand factors. Other people say no, because it’s actually used in physical industry. People are going to economize when the prices get too high, so there’ll be a stable band for silver prices. Where do you see the silver price story going forward? Will it become a monetary metal over time, an industrial metal? Where’s silver going in your eyes forward?
Hiren Chandaria
Forward. So it’s a double-edged sword for silver, right? One way it’s positive because there are two kinds of factors which can lead demand higher. At the same time, there are two factors which can lead the demand lower as well, right? And what tends to happen in silver is if you look at currently, the industrial demand for silver is pretty, pretty robust, right? And it’s increasing.
The new technology, the EVs, solar panels, whichever way you look at it, silver is doing quite good. So that’s the positive In terms of the monetary thing, now I don’t know any central banks who are buying silver right now, okay? And central banks are one of the major movers who have moved gold market over last many, many decades. So if you look at it, there was something called Gold Sales Agreement where central banks used to predict what amount of gold they are going to sell, and they can sell only that much. Now, that was a thing of the past.
Now, what has happened is central banks have started buying and they are buying for so many reasons, one of them being de-dollarization. And everybody has seen what has happened to Russian assets being frozen.
So they don’t want their assets to be frozen. So they are moving away from the dollar little by little, slowly but gradually they are moving away. And that is resulting in gold accumulating in the central bank ecosystem. I don’t think so. Such kind of ecosystem is going to develop for silver. It’s a much bulkier asset and much difficult, much more tedious to store. So, and that having industrial demand is positive. So it’s more likely to be, I would say, tilt towards industrial demand than towards monetary assets.
Monetary Metals
And where do you see the digitization story coming for both gold and silver? Obviously, if you can say, well, I want to buy just ‘Well, I’ll buy just 1 gram of gold.’ Oftentimes, you know, that’s not really practical because of the size. But if you said, ‘Well, I’ll buy 1 gram of digital gold,’ then all of a sudden maybe that becomes a lot more feasible. Same with silver. But then at that point, if you have such small denominations of gold, what is the monetary benefit of having silver, which historically was used for smaller purchases? So do you see this digitization of gold and silver actually harming silver’s monetary status over time?
Hiren Chandaria
First and foremost, that’s a very important point you raise, right? If you buy 1 gram of gold in bars and coins, you pay a lot of charge in terms of the making, in terms of the packaging, in terms of the markup. So it’s way higher. At times in India, it’s moved up to 18-20% as well over the prices. Right. So that’s just the kind after duties and everything. So that’s, that’s quite steep.
Now, with the digital gold and digital silver coming in, it’s way easier to buy at a much more cost-effective way. So that’s, that’s one. And that, as you rightly pointed out, I think it has, it has impacted that if I can buy gold, a smaller denomination worth of gold in a digital form, then I’m better off than buying silver. And that, that I think it’s going to dent a little bit of monetary value of silver or monetary demand of silver.
Monetary Metals
And going forward, how important is the health of the Indian economy, whether inversely or correlated, to the price of gold and silver going forward? If the Indian economy is doing really well, does that mean people are going to be buying less gold and silver? Are they going to be buying more gold and silver because they can afford to? What do you think the correlation is between the strength or the weakness of the Indian economy and then the strength or the weakness of gold and silver prices going forward?
Hiren Chandaria
It is positively related because as more number of people accumulate wealth and more middle class comes into play, I mean, they have more disposable income, then a part of it would go to gold as well. That is very positive for the gold prices. So the new age millennials or whatever way you call it, younger generation are less inclined towards buying jewelry, but they are more inclined towards buying gold in digital form and in bars, coins, ETFs. So I think that’s going to be positive and the tilt is moving a little away from jewelry. But more towards digital gold.
Monetary Metals
And what do you think is the biggest change that we’re going to see in the Indian gold market? Is it digital gold products? Is it gold leasing where, you know, retail Indian buyers are earning yield on their gold? What do you think is going to be the biggest change to the Indian gold market? Or do you think really what’s going to happen is the Indian gold market is going to do what it’s always done and the rest of the world is going to start to look more like the Indian gold market versus the other way around?
Hiren Chandaria
I think the gold demand globally would go up going forward. That’s, that’s what my take is. Central banks are buying, there’s de-dollarization. I believe the scenario which is likely to span out would be stagflation. So you would have higher inflation with lower economic growth. I think that’s, that’s likely to go up with the advent of AI.
There are two schools of thought where people say that one school says that, okay, people are going to adjust and they’re going to more number of jobs would be created, economy would be doing better. But there’s other school of thought which says that, okay, there are more number of job losses which would happen. I would sway towards there would be a lot of job losses, and so many things would be mechanized.
The efficiency of employees would increase several folds with the, with the coming of AI. So all such things would result in a little bit of skepticism towards economy, and that would result in assets which are kind of fallback assets or safe haven assets. And that’s where I think gold demand would increase. So globally, that’s likely to happen. And in terms of Indian jewelry demand, I don’t think so.
That’s something which is inherent to the Western culture. And I don’t think so that’s likely to happen from the jewelry perspective. From the digital investment demand, the investment demand is going to rise globally for gold and silver.
Monetary Metals
What do you think is the biggest risk to the gold and silver market going forward? Is it Is it interest rates? Is it, you know, economic tariffs? Is there some other kind of black swan event that maybe we’re not focusing on? What, in your opinion, is the biggest risk to the gold and silver markets going forward? What I see is the interest rates.
Hiren Chandaria
So if interest rates goes up, the opportunity cost of holding gold, investing in gold, goes up quite significantly. And if that happens, it puts a little bit of pressure on the gold prices. And second most important risk is all markets are superheated right now. In superheated market, if you look at it, Many a times, or almost always in my opinion, whenever I have seen the—I’ve been a trader before, investor before, right?
At the start of a bull market, gold tends to taper off, falls along with other asset classes, and then reallocation happens. The reason is pretty simple. What typically happens is most of the hedge funds and most of the big guys, if their global stop losses are hit, they move out of all the markets at the same time. So irrespective of the markets which you have invested in, whether it is gold, whether it’s silver, whether it’s crude, commodities, private equity, wealth management, anywhere, any equities.
So they will move out of all the assets in a single go, and that would have a spiraling effect. One guy does that, the second guy’s stop losses are hit because prices have fallen down quite steeply, the third guy, fourth guy, so it has a spiraling effect and everything falls down together.
It’s only when the reallocation happens after that you look at it, okay, after this, I think now the allocation to gold should increase, and that is when gold starts going up. But I think that’s the second risk.
Monetary Metals
All right, Hiren, what’s something that we didn’t hit on today, something that maybe we missed with my perfect interviewing skills not being so perfect? What’s a topic, a theme, an area, a question that I missed today that you think is important for our viewers to know?
Hiren Chandaria
I think you covered it very well, Ben. Thank you very much. But I would say the only thing is I feel so many questions I keep getting from, from people is What is the right time to buy gold? I would suggest that time to buy gold is to defer your investment, not worry about prices too much, not worry about prices, and keep staggered investment in gold.
So, for example, if you want to buy something today, if you want to buy something, a very big chunk of money, and you are not going to have anything later on, then I would suggest you buy 10% of it today, put 90% in liquid markets and mutual funds or anywhere else, and every month keep on buying 10%. Without looking at the price. I believe this strategy has worked very, very well for at least 90% of the people. The 10% are lucky who were able to time the market, but I would dissuade people away from timing the market and focus on accumulating gold over a period of time.
Monetary Metals
Two final questions here. One, what’s a question I should be asking all future guests of the Gold Exchange Podcast?
Hiren Chandaria
I think the one question you should ask is what are the real risks? What are the real risks to the economy? And what real risk to the dollar dominance? These are the two questions which would, which would shape the way world works, I think.
Monetary Metals
All right, Hiren, I won’t let you get away with it. I’m just going to turn the questions around on you and make my job real easy. So what do you think are the answers to your awesome questions?
Hiren Chandaria
The risk of war, geopolitical risks are going to go up. I think the dominance, monopolistic world does not seem to be true any longer. There are multiple powers and forces at play. And people are trying to dominate and capture economies. What is very apparent today, and that’s, that’s going to change the way the world looks at each other. So that’s, that’s one.
And second is, I believe the risk of de-dollarization would be real. Today it seems a little far-fetched, but I think it would be real, and fiat money would be challenged. Fiat money would be challenged. Inflation is going to go up, things are going to go haywire. The balance sheets of economies are expanding. So it’s just going crazy. There is no rationale which could explain how this is sustainable. So I think that’s, that’s one of the major challenges.
Monetary Metals
Hiren, as always, it is a pleasure and fascinating getting to interview you. Usually I ask our guests, hey, where can people find more of your work? But Hiren, I know where they can find you. It’s at Monetary-Metals.com. You can follow us on social media, LinkedIn, Twitter, Facebook, we’re everywhere. Hiren, thank you so much for joining us. Any last words?
Hiren Chandaria
Thank you very much, man. You’ve been a great host.
Monetary Metals
Hey, Ren, I’ll see you at your work. Thanks so much. Thank you.
Hiren Chandaria
Bye. Take care.