Larry Fink (Larry Fink), founder and CEO of BlackRock (BlackRock), the world's largest asset management company, said in an annual letter to shareholders that India's love for gold has neither benefited its economy nor brought significant returns to investors.

Fink said, “When I visited India last November, I met some policy makers who lamented the country's love for gold. This commodity underperformed the Indian stock market. Investing in gold is not helping the country's economy either.”

Gold can be a good store of value, but it doesn't stimulate economic growth. When someone keeps money in a bank or invests in a house, it has a multiplier effect and stimulates economic activity. “But what about gold? It's in the safe,” he said.

India is one of the largest gold markets because this precious metal plays an important role in the country's culture. Buying gold during weddings and festivals is generally considered auspicious by Indians. It is also seen as a symbol of safe investment and wealth. Indians can invest in gold in many forms, including buying jewellery, exchange-traded funds (ETFs), and sovereign gold bond programs.

Using the role of the US capital market in the US economy as an example, Fink emphasized the importance of the capital market and how the capital market can improve a country's economic position, but gold cannot do it.

“No other force can lift more people out of poverty or improve their quality of life like capitalism. There is no other economic model that can help us achieve our highest expectations of financial freedom — whether for ourselves or for our country.” Fink said.

India has always been one of the highest consumers of gold in the world. According to data from the World Gold Council, the Bank of India purchased 4.7 tons of gold in February, bringing its gold reserves to an all-time high of 817 tons.

However, Kavita Chacko (Kavita Chacko), head of Indian research at the World Gold Council, said that the recent record high of gold prices may hurt India's demand for this precious metal. “Demand is unlikely to rise significantly in the next few months, even if the price of gold is moderate, as the country is about to hold a general election (April-June), and the flow of gold and cash will be closely monitored,” Chaco said.

India's gold imports are expected to fall 90% in March

Demand for gold in India usually remains strong in March as jewelers prepare for the Indian wedding season. However, according to sources, India's gold imports in March are expected to fall by more than 90% month-on-month, the lowest level since the outbreak of COVID-19 (at the time, air traffic restrictions led to import restrictions, and the closure of jewelry stores due to lockdown measures). Imports are expected to be between 10 and 11 tons in March, compared to 110 tons in February. Government officials said that after paying tariffs this month, only an insignificant amount of gold was cleared. Compared to the previous month, gold imports fell sharply.

India's reduction in gold imports may limit the rise in global gold prices. Falling imports also helped India narrow its trade deficit and support the rupee.

Two Mumbai-based gold dealers said they imported very little gold in March due to weak demand. “Even if the discount was over $35 per ounce, jewelers wouldn't buy it. There's no reason to import gold at record high prices and wait for demand to emerge,” said one of the gold bar traders. In India, domestic prices rose to a record level of 66,943 rupees per 10 grams earlier this month. This prompted dealers to offer discounts of around $38 per ounce, the highest since March 2023.

Additionally, jewelers have stopped buying gold from banks because customers are exchanging their old jewelry for new ones due to excessive prices. Also, the refinery has almost stopped importing gold bars.

In contrast, the Indian stock market has always been one of the biggest gains in the Asia-Pacific region. Major institutional investors are optimistic about the Indian stock market. Since this year, the Indian stock market has hit record highs many times.