Two case studies: how gold saved India and South Korea

In financial circles, especially during prolonged periods of peace and stability, the advantages of different currencies are broadly discussed: the dollar, the euro, the yuan... But when the storm clouds are gathering over the economy, many experts just as heads of states turn to eternal values. At the end of the last century, the leaders of two Asian countries faced a similar situation.

India

In 1991, a sharp reduction of the foreign currency flow severely hampered the country’s economy. The Indian rupee fell by 32% against the US dollar. India mired in debt and could not cover the expenses on its own.

The government asked the IMF* to provide financial aid, handing over the entire gold reserve of India as collateral – 67 tons of gold. This made it possible to get an emergency loan of $2,2 billion and take further anti-crisis measures. The new reforms not only revived the Indian economy, but also made it one of the fastest growing in the world.

In the chart: the growth rate of India’s GDP* (2016-2019) in comparison to other countries, including the growth rate projection for 2019 (according to the IMF).

India valued the role of gold – the asset that saved the entire nation. Since then, India has systematically increased its gold reserve, which currently amounts to 607 tons of gold – nearly 9 times the amount that helped India 28 years ago.

South Korea

Due to the financial crisis that hit in 1997, the country was on the verge of bankruptcy. The IMF provided a substantial loan to fix the situation. A year later, in an effort to find funds to pay off the loan, the government launched a national campaign to collect gold.

Gold holds a special place in the Korean culture, a significant part of the population owns various types of gold products. 3,5 million people responded to the government’s appeal. The Korean people demonstrated cohesion and patriotism: people handed over their coins, chains, rings, statues, sports memorabilia and military awards. The ribbons attached to the clothes of the campaigners had the following inscription: “Let’s overcome the currency crisis with gold”.

As a result, 226 tons of gold worth $2,2 billion were collected and consequently remelted into gold bars to repay the IMF loan. As a result of the campaign, South Korea paid off its debt almost three years ahead of schedule.

In the photo: Kim Dae-jung, the President of South Korea, hands over his gold jewelry.

In any situation, the ability of gold to maintain its value makes it an ideal anti-crisis tool. Knowing this, the heads of states stock up gold in case of emergency. The more alarming the situation in the country or in the world gets, the more important gold becomes.

Everyone can learn from the experience of politicians and strengthen financial security with the help of gold. The acquisition of the noble metal is a valuable contribution to the future and the insurance against unforeseen challenges.

10 REASONS TO BUY GOLD

Glossary:

*IMF (International Monetary Fund) — a specialized agency of the United Nations that monitors the stability of the global financial system and provides loans to countries.

*GDP (Gross Domestic Product) — is an economic indicator showing the total value of all goods and services produced in a country.