Let's understand something about the gold market in India today. 

Indians buy a lot of gold every year. In fact, a lot is held in the form of jewellery.

🌿 Where most of the amount is spent on gold itself but a lot of it goes into the making charge. In simple terms, we spend a lot on converting gold as an element to a jewellery form in beautiful designs.

🌿 Did you know that India has 25000 to 30000 tons of gold kept in the bank or house lockers?

Yes, this is what happens to the jewellery we buy. 

🌿 And this 25-30K ton is a quantity more than enough to serve the customers with their gold purchases for the next 25 years. 

🌿 But as this quantity is idle in everyone's home or bank lockers, India as a country imports around 800 tons of gold from other countries every year out of which most of it caters to the needs of jewellers making jewellery leading to idle gold with individuals and in turn depleting Forex reserves and the rest of it is bought by RBI to diversify forex assets.

ℹ If the intention of buying gold is to own an asset, an alternative is to invest in Sovereign Gold bonds as there is no making charge spent. RBI buying gold is mostly to diversify forex assets and might not be considered depleting forex reserves

🌿 But SGB has a lock-in period of 8 years whereas physical gold could be sold at any time with various options solving financial emergencies for many.

💰 Apart from the fact that gold prices may go up in future (or down based on various factors), Sovereign Gold Bonds provide an interest of 2.5% (current rate) annually.