This unique cultural norm means that India has, in essence, a dual currency system. On one hand, you have the official government-issued rupee, and on the other, gold. For many years, the yellow metal has been the preferred by the vast majority of people, and that’s unlikely to change any time soon.
If the Indian government decides to crack down on gold holdings – as some believe they will – silver could begin to take gold’s place. In fact, a trend toward silver has already begun taking hold.
How big could India’s impact on silver prices be? Absolutely massive!
Even a small substitution from gold to silver would result in a massive increase in the price of silver. A 10% reallocation from gold jewellery investment to silver in India would nearly double world silver jewellery demand. Mines and other sources would not be able to fill the gap immediately; prices would rise, further fuelling demand and creating a new, shiny headache for those trying to marshal India’s unusual economy.