What is a Gold Bug?

The term gold bug is widely used in the financial Industry and among economists to describe those who are extremely bullish about gold and regard it as an investment or a yardstick for assessing wealth.

According to this, a person is considered a gold bug if they believe they should keep all or a portion of their assets in gold. Usually, those who advocate for gold do so because they anticipate a rapid or unchecked expansion of the money supply and high Inflation rates.

How does a Gold Bug Work?

In general, gold is a safe harbour from the miseries of inflation and turbulent markets. It is frequently seen as a "safe" investment during uncertain times since it is commonly recognised as a store of value. Indian cultural beliefs and the tendency to save, both of which are influenced by the perception of gold as a secure investment, are the main drivers of an Indian consumer's desire for gold. This desire is increased because gold jewellery can also be used as a Liquid asset.

Ways to Combat Gold Bug

It could be challenging to limit Indians' purchases of gold, given their strong cultural and religious links to the gold. However, the fact that a sizable amount of people's savings are invested in tangible goods, like gold, shows that the Financial System has a lot of room to seize these chances. This is done by Offering gold jewellery loans; there is a lot of potential to increase Financial Inclusion. If banks continue to increase their portfolios of gold loans, the reliance of the economically less advantaged segments of society on money lenders and pawn brokers will drastically decline and, in turn, combat gold bugs.

The Bottom Line

Undoubtedly, India is the leading buyer of gold worldwide. There has been a lot of discussion over the sharp increase in Indian gold imports and the harm they are causing to the current account deficit, as well as the merits and disadvantages of the government's ineffective efforts to halt the yellow tide. While controlling inflation would help, reviving the Economy as a whole is the greatest way to wean Indians off of their current obsessive gold purchases. The gold bug that is biting India will persist for a while since controlling the inflation will take time.