Demand for Gold — Not Bitcoin — Skyrockets in India Amid Another Demonetization

Key Takeaways:

  • Two thousand rupee currency notes will be discontinued in India from September 2023.
  • The Reserve Bank of India (RBI) issued an ordinance earlier this month.
  • Indians rushed to buy gold and real estate, shunning Bitcoin (BTC).
Indian Citizens investing in gold after a new round of demonetization sees the 2000 rupee notes taken off circulation. Bitcoin (BTC) shunned
Indian Citizens buying gold after a fresh demonetization will see the 2000 rupee notes come out of circulation. Pic Credit: Canva

YEREVAN ( — Amidst a fresh wave of demonetization, Indians are increasingly seeking solace in gold to preserve their wealth.

The persistent economic instability and the government’s latest move to withdraw 2000 rupee notes from circulation have sparked a surge in gold purchases nationwide. Bitcoin (BTC) — and other cryptocurrencies — find little love.

With the value of traditional currency under threat, many Indians are turning to the trusted allure of gold. Its enduring status as a safe option has made it an attractive investment option for those seeking stability and security.

Demonetization refers to the process of withdrawing a specific currency from circulation. This typically occurs when there is a change in the national currency. It involves removing and replacing the old currency notes with a new currency unit. 

The first instance of demonetization in India occurred in 1946, followed by a second occurrence in 1978. The third instance, which created a lot of controversy, took place on November 8, 2016, under the current Narendra Modi Government. 

The Modi Government completely removed the 1000-rupee notes from the market. Moreover, it discontinued the old series of old currency notes and introduced new ones in various denominations.

The move caused chaos across all sections of society, including the upper, middle, and lower classes. While some people welcomed the move as a means of curbing black money, many others have suffered as a result.

Also Read: UAE Exploits US-Led Sanctions, Imports Gold From Russia Amid Economic Turmoil

Indian Government Discontinues Rs 2K Notes

In a fresh circular dated May 19, the Reserve Bank of India (RBI) announced the withdrawal of Rs 2,000 denomination currency notes from circulation. The circular stated that these notes will remain legal tender until September 30.

Additionally, the RBI instructed banks to stop issuing Rs 2,000 denomination notes immediately.

Interestingly, the Indian Government introduced the pink Rs 2,000 note seven years back. It is the highest denomination of the Indian Rupee available on the market. 

The policy has once again rattled the Indian economy, prompting citizens to explore alternative avenues for safeguarding their wealth. This move is supposedly aimed at curbing black money and counterfeit currency.

However, it has created an atmosphere of uncertainty and prompted individuals to seek out tangible assets like gold.

Gold has long been integral to Indian culture and traditions, revered as a symbol of wealth and prosperity. The deep-rooted affinity towards gold is now resurfacing. Many Indians are keen on securing their financial well-being through tangible assets amidst the prevailing uncertainties.

Indian Citizens are investing in gold after a new round of demonetization will see the 2000 rupee notes taken off circulation.
Ten years back, in May 2013, the Indian Rupee traded at around 65.5 against the dollar. Credit: Trading Economics

One of the primary drivers behind this renewed interest in gold is the fear of the devaluation of the currency. Indians have witnessed the erosion of their purchasing power in the past, prompting them to view gold as a reliable store of value that can safeguard their wealth against inflation.

The value of the Rupee has fallen significantly against the US Dollar. In the past decade alone, the greenback has risen over 47% against its Indian counterpart. 

Nonetheless, Bitcoin (BTC) has failed to establish itself as a safer option for Indians looking to secure their savings.

Gold Rush 

The ease of accessibility to gold in various forms, such as jewelry, coins, and bars, makes it an attractive investment option for Indians across different income brackets. This accessibility has further fueled the growing demand for gold as people seek to diversify their portfolios and protect their savings.

In addition to individual investors, the demonetization policy has also impacted small businesses, leading them to embrace gold as a liquidity means. The ease with which gold can be converted into cash provides a crucial advantage for businesses during these challenging times.

The Reserve Bank of India scrapped the use of Rs 2,000 notes in the country. People rushed to buy Gold with the notes. Credit: India Today

The surge in gold purchases has resulted in a significant uptick in gold prices, marking a notable shift in the precious metal market. This surge has led to increased demand for gold imports, prompting the government to consider measures to curb imports and reduce the outflow of foreign currency.

According to local media reports, some jewelers have seen a 20% rise in sales. Moreover, many sell gold a few dollars above the market rates. 

The Reserve Bank of India has given time till September 2023 to exchange or deposit the Rs 2,000 notes. However, many Indians prefer buying gold to going to the bank. 

Besides Gold, many Indian citizens also invest in real estate, buy oil, or acquire new electrical appliances. 

Meanwhile, given the market volatility, people hesitate to invest their savings in Bitcoin (BTC). The world’s largest crypto by market cap has seen its price fall over 60% since its all-time high of $68,789. It currently trades just above the $27,000 mark.

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