That news appeared in an article by Andy Mukherjee at Bloomberg in which he was wondering ….
When Will India Kick Its $200 Bln Gold Habit?

Let’s take a look:

If John Maynard Keynes were alive today, he would be horrified to see gold rallying again, and for a reason very familiar to the British economist: India’s ‘ruinous’ love of the ‘barbaric relic.’

Almost 100 years after Keynes used those words to chide India for its extravagance, the billion-people nation shows no signs of losing its fondness for the metal. India accounts for 18 percent of world demand, more than any other country.

Gold traders aren’t the only ones betting on Indian wedding demand. General Motors Corp.’s Indian unit is trying to whip up demand by throwing in a free gift of 30,000 rupees ($690) worth of gold jewelry for every purchase of its Chevrolet Optra sedan.

“Plush leather seats, jewel-effect headlamps and heaps of gold for your wife,” says the GM ad line.

With increasing modernization and urbanization in the nation, the proportion of gold in the bridal trousseau should also have been on the wane. However, India’s gold consumption rose 57 percent from a year earlier in the 12 months ended March 31, on top of a 63 percent jump in the previous year.

“Gold holdings among Indian households at current market value are about 2.5 times the current equity holding of $80 billion,” said Chetan Ahya, a Morgan Stanley economist. In other words, some $200 billion, or the equivalent of 29 percent of India’s gross domestic product, is locked up in jewelry.

Economists continue to debate whether Indian demand is excessive; social activists ask what it’ll take to end the continual harassment of brides for dowry more than four decades after the practice was outlawed in 1961.

The question for gold traders is whether Indian demand will stay strong enough to push prices even higher. Investors such as Marc Faber in Hong Kong have predicted $5,000 an ounce. Much before prices scale those scary heights, the metal’s appeal to Indians may start to diminish.

According to India’s latest census, more than 47 million girls in the age group of 15 to 29 have yet to marry. Assuming 80 percent of them do so in the next five years, that’s 38 million weddings. At a very modest 10 grams per wedding, or slightly less than one-third of an ounce, that would translate into 76 metric tons of demand a year, enough to buy a fifth of all gold mined in South Africa last year.

“It’s a good thing Keynes isn’t around to see that” says Mr. Mukherjee.

Will this help GM? Somehow I rather doubt it. Will GM boost gold sales? I rather doubt that as well (at least to any significant degree). On the other hand, 38 million weddings at the projected rate seems like a fair amount of gold. Perhaps gold bugs need to monitor the number of Indian weddings.

Unfortunately, Mr. Mukherjee who seems to agree with Keynes, completely misses the boat on two key points.
1) Gold is going to be around a lot longer than the Rupee, or for that matter, the US$.
2)In a world awash in overcapacity, investing in gold seems far smarter than investing in more widget makers.

Mike Shedlock / Mish/