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Nowadays, Evolution of Coins as Commodities in Indians market are adorning themselves in silver and gold, but not just in the way our ancestors did. Today, gold and silver aren’t just wearable items – they’ve become a form of currency for middle-class households looking to invest in assets with intrinsic value.
Evolution of Coins as Commodities
The purchase of gold, in particular, holds significance during the country’s Diwali festival in October as it symbolizes wealth and prosperity. This is one reason the gold industry contributes 1.3% towards India’s GDP – and why the country’s gold consumption sees a major spike in the second half of the year. And with gold demand up 7.3% compared to 2021, there are no signs of it slowing down.
Silver, for its part, is a consistently growing commodity, with the country’s investment in silver bars and coins accounting for a third, or nearly 730 million ounces, of the overall demand for the precious metal since 2010. It is also more accessible and affordable than its gilded counterpart, which explains its soaring demand.
But for those who are accustomed to trading and collecting silver and gold for their inherent value alone – rather than as a medium of exchange – it can be challenging to pinpoint where it all began. What exactly is commodity money, and how has history evolved to position coins from speciality collector’s items to powerful investment opportunities?
What is commodity money?
Compared to the abundant paper currency we know today, commodity money derives its value from the material it’s made of. This is different from fiat money, the value of which is backed by the government that produces it – the United States dollar and our very own Indian rupee are prime examples. Evolution of Coins as Commodities money is also much more durable. Because gold and silver coins are rust- and corrosion-resistant, they’re able to retain their value over time. One can secure coins from the Indian Government Mint and lock them away for safekeeping. Because they’re tangible, these coins are easy to transport and divvy up to make smaller transactions easier.
However, the tangibility of these coins comes with disadvantages. Because they are made of a finite resource, they’re expensive to produce, and large amounts of it are heavy and hard to store. Worst of all, they are vulnerable to theft. To sidestep these cons, many savvy Indians are resorting to investing in digital gold.
With the internet and the advent of fintech apps, it’s more accessible to trade commodities like gold or silver – even if you don’t physically acquire these assets. Now, avid coin collectors and other investors keen on jumping into the global commodity market can easily trade XAU (gold) or XAG (silver) as currency pairs with the US dollar. Other metals, such as aluminium, nickel, and zinc, as well as energy-related commodities like crude oil and natural gas, are available for those seeking to diversify, all with fast execution and low, stable spreads. Evolution of Coins as Commodities is best option for investment.
The history of coins as commodities
In one survey, 53% of Indian investors would rather invest in digital gold over mutual funds, but commodity money is not without its drawbacks. For one, it can experience periods of volatility, which means there’s always a chance that its value may decrease. Volatility of value is something ancient Indians sought to minimize.
The gold and silver scarcity in 1760s British-occupied India was a recipe for disaster, which is why several private banks began producing the country’s first-ever banknotes. The British East India Company refused to recognize these notes at first, but when the banks failed, the Bank of Bengal, which was partly owned by the government, began to issue sicca rupee coins.
The earliest known coins were silver punch-marked, but other metals like copper and lead were used as well. No matter what they are made of, however, old coins continue to hold immense value and significance today. Their intricate designs are a direct reflection of the historical period in which they were created. They also serve as a tangible reminder of India’s great strides as a country, overcoming war and economic turmoil to become the cultural juggernaut it is today.