A K Agnihotri: ALL THAT GLITTERS IS GOLD (part iv)

India's Love of Gold 

The History of the Passion

In India, gold is religion. India's love affair with gold is timeless, spanning centuries and millennia.

"In India, it always was and still is, much more than just a precious metal. It is part of the fabric of our culture and an inseparable part of our belief system. It is the essence from which the universe was created. In a dark and lifeless universe, the Creator deposited a seed in the waters he had made from his own body. The seed became a golden egg, bright and radiant as the sun. From this cosmic egg of gold was born the incarnation of the Creator Himself - Brahma. From the root word Hrimeaning imperishable, comes Hiranya, the ancient name for gold. Brahma is referred to as Hiranyagarbha - the one born of gold"(1).

In Hindu mythology, some of our goddesses are described as golden-hued, the ultimate in beauty. Gold, as the basis of so much purity and beauty, is referred to as the seed of Agni, the God of Fire. Manu the ancient law-giver decreed that golden ornaments should be worn for specific ceremonies and occasions. "Mythological tales tell us how our Gods and Goddesses rode on golden chariots. Gold has always been considered a sacred item in the Hindu way of life and is a must in every religious function, the explanation being that gold is pure having passed through fire in its process of evolution."(2). Over centuries and millennia, gold has become an inseparable part of the Indian society and fused into the psyche of an Indian. Indians see the metal as a symbol of purity, prosperity and good fortune.

Over a few thousands of years, many kings, emperors and dynasties featuring countless wars, conquests and political upheavals have ruled the Indian sub-continent. Different dynasties ruled different parts of India with different monetary systems. Gold acted as a common medium of exchange or store of value across  the monetary systems of different kingdoms across the sub-continent. Hence wealth could still be preserved in spite of wars and political turbulence. Gold also helped preserve wealth through natural calamities and disasters and for centuries was the only means of saving in rural India, land being the other main asset of economic value. This has largely helped formulate, or evolve, the Indian sentiment and fanatical passion for gold, which holds true even today. India is estimated to hold more than 26,000 tonnes of gold.

Quiet Progress

For the last 20 years, World Gold Council has shown India’s annual gold consumption fluctuating from 400 to 800 tons. Estimated Indian gold reserves at 25,000-30,000 tons are double of the next largest country – the USA with 14,000 tons. India has 20% of the world population and also more than 20% of the world’s above the ground gold.

India and the World

For much of the last 2000 years of recorded history, India has been the largest buyer of gold. Roman historian, Pliny lamented (some 1800 years ago, how India, the sink of precious metals was draining Rome of gold – an appellation that resonates even today.

In the Indian North West (modern Afghanistan), Greco-Bactrian coins were made (seemingly) from the “Roman gold coins, which poured into India.” To “manage”  this drain of gold, Romans reduced the gold content in coins. Septimus Severus, (193-211 AD) further debased the currency. Roman coins after Septimius Severus are rarely found in India leading to the belief that Indians just stopped accepting the debased coin –and Roman coins were melted to make payments in pure gold.

In mid 17th century, a Superior of the Capuchin Mission at Isfahan, friar Raphael du Mans wrote (in 1660), an authoritative paper, Estat de la Perse, which was used by the French Minister Jean Baptiste Colbert, to form the French East India Company (1664). This Christian missionary in Iran, Raphael du Mans thought that India is “where all the money in the Universe is unloaded as if into an abyss.” Central Asian invaders, looking for slaves and gold, aimed at lksus dh fpfM+;k (loosely, the ‘golden goose’). Their partly successful raids were deemed as invasions by colonial historians.

The Byzantine Empire, successor to the Assyrian-Achmaenid-Macedonian-Roman lineage, similarly found that their reserves of precious metals were ‘again, leaked away to India.’ A significant part of Indian royal treasuries, when these hoards “fell a prey to European invaders, it was found that the gold coins of the Byzantine Emperors formed no small part of their treasures”

In 1748, Baron de Montesquieu, warned Europeans that …

Every nation that ever traded to the Indies, has constantly carried bullion, and brought merchandises in return. … commerce of the Romans to the Indies was very considerable … this commerce was carried on entirely with bullion … They want, therefore, nothing but our bullion, to serve as the medium of value, and for this they give us merchandises in return … that bullion was always carried to the Indies, and never any brought from thence.

The Ottomans put restrictions of export gold to Iran, from where gold exports to India were made. Safavid Iran, in turn, put restrictions on gold exports from Iran to India. No help at all.

Even today writers resent that despite the“absence of indigenous sources of gold and silver” the“very favourable export-import balance” resulted in“inherent strenghth of the Indian economy”.

Further, it has been correctly observed that in “our period the subcontinent drew vast amounts of gold and silver, exceeding previous periods and exceeding all other parts of the contemporary world so far.”

The French traveller Francois Bernier enviously wrote how

It should not escape notice that gold and silver, after circulating in every other quarter of the globe, come at length to be absorbed in Hindostan. (From Travels in the Mogul Empire By François Bernier, Irving Brock)

Another writes how

“in exchange for textiles, spices and other Indian agricultural and industrial products, merchants from across Europe and Asia flooded India’s bazaar’s with dinars, tangas, ducats, guilders, reals, francs, rixdollars (reichthalers) and countless other varieties of coins, all of which were minted into rupees. (From The Indian Diaspora in Central Asia and its trade, 1550-1900 By Scott Cameron Levi)

Moving away from Central Asia, the general European economy, was simple -

It was not surprising to find that Ian Fleming, pitted Western fiction’s best secret agent, James Bond against Auric Goldfinger – who was smuggling gold out of a declining, post war Britain to India.

During various collapses of temporary gold standards in history, Indian gold reserves (usually unwillingly) stabilised world economies. In recent history, Indian gold reserves went out to stabilise the American currency during the Great Depression and the German currency during the post-Wiemar drift. Indian silver reserves broke the Hunt Brothers’back and their silver gambit in the 1980's.

After (colonial) India’s accession to the world gold standard in 1898, India, especially during WWI, rapidly built up an export surplus. British reserves of gold started drying up – in spite of gold export restrictions to India by the USA, Britain and much of the Western world. There was hysteria in popular press and politicians on the subject of India and its appetite for gold.

Crash in silver prices

During 1800-1900, new mines and increased silver production saw a crash in silver prices. Abundant silver discoveries and mining had flooded the world with silver, depressing prices. Germany’s move to the gold standard in 1873, released even more silver in the world markets. The Opium trade further released vast amounts of silver from China – which was opened to ‘free trade’, giving rise to some of the biggest Western fortunes (of the Roosevelt’s, for instance).

With increased silver supplies, US silver coinage was depreciating.

To be continued.....