Betting on Gold and Global Dominance: How India’s Boom Could Dethrone China

Buckle up, because India isn’t just racing on the path of economic transformation; it’s blazing a trail. We’re talking about a nation that has evolved from contributing just 6.3% of global GDP growth in 2007 to a projected 17.4% by 2028. The underdog is gaining ground on China, and gold investors might be the unexpected beneficiaries.

The Shift in the Economic Landscape

In Q1 2023, India’s GDP growth stood at an impressive 6.1%, leaving China’s 4.5% in the rearview mirror. If you think this is mere fluke, you’re missing the larger tapestry of a world reshaped by dynamic trade, open markets, and crucially, domestic reforms.

People Power

Consider this: India is now the world’s most populous country, overtaking China in April this year with a population of 1.4 billion. By 2027, India is expected to add 75 million more citizens, while China will lose 8 million. China’s ageing, plateauing middle class lacks the fuel for significant economic expansion. In contrast, India’s youthful, underemployed population is a powder keg waiting to explode—in a good way.

The Pitfalls of Central Control

China’s love affair with central planning doesn’t just come with a bouquet of red roses; it has its thorns. High-profile tech billionaires go missing only to resurface “humbled.” This iron grip stifles creativity and injects tension into international relations. On the flip side, India—boasting a global diaspora helming companies like Alphabet, Microsoft, and Adobe—capitalises on its reputation for entrepreneurial freedom. Apple’s choice to manufacture the iPhone 14 in India instead of China is a glaring example.

The Achilles Heel

But let’s not get carried away. India has hurdles to clear. Despite its enormous promise, the nation has a history of failing to capitalise on its economic potential. Although Indian PM Modi has ushered in crucial infrastructure and modernization programs, the ghosts of bureaucratic and social challenges still haunt India’s progress.

The Numbers Game

To put things into perspective, China’s GDP sits at a hefty $17.7 trillion compared to India’s $3.2 trillion. China outpaces India in STEM graduates, R&D investment, and literacy rates. But remember, China was once an underdog too. In the ’80s, its economy was smaller than India’s. If China can leapfrog its way to economic primacy, why can’t India?

Gold: The X-Factor

And here’s where gold comes in. In India, gold isn’t just a metal; it’s part of the national psyche. Indians are increasingly moving from rural to urban settings, changing the form in which they invest in gold—from jewellery to bars and coins. As India’s economy expands, so will its appetite for gold, making it a market impossible to ignore for global investors.

The Long Road Ahead

India might be where China was in the early 2000s. The recipe for success includes enhancing educational systems, modernising infrastructure, and steering focus towards cutting-edge sectors like AI. The nation needs to decide if it’s content with mere participation or becoming a serious player.

As India fine-tunes its focus, the world watches. Recently India has focussed on getting a spaceship on the moon, which is an incredible achievement, but at the same time investment in AI is falling far behind the level one would expect of an emerging superpower.

This may be telling as to where their priorities lie; playing to stay in the game or playing to a domestic audience. There can be no doubt that their future is in their hands and if fully embraced, all the world will benefit from their success, even the Chinese.

From The Trading Desk

Market Update 

The gold price has continued to gain this week, back above $1945 on Thursday morning.

This comes on the back of disappointing macro data released out of the US on Wednesday, with US private sector employers adding 177K jobs in August below the forecasted reading of 195K.

In addition, the US economy expanded by 2.1% annualised, missing its estimate and below a forecasted 2.4%.

This timely data comes before the Fed meets next month which may lead to the Federal Reserve pausing its rate hikes in September.

This weighted on the USD helping gold move higher and a possible looming recession which is also positive for gold going forward.

Markets and trade volumes will start to get back to normal next week after the labour weekend in the US and we expect to see volatility return to the markets this autumn.

The US banking collapse we saw earlier in the year was plastered over, we expect to see these cracks appear again.

It very much feels like a market where investors have one foot in and one out, the calm we have seen over the last few months could change very quickly indeed.  

GOLD PRICES ( AM/ PM LBMA FIX– USD, GBP & EUR )

Buy gold coins and bars and store them in the safest vaults in Switzerland, London or Singapore with GoldCore.

Learn why Switzerland remains a safe-haven jurisdiction for owning precious metals. Access Our Most Popular Guide, the Essential Guide to Storing Gold in Switzerland here.