Wisdom from the West says that you should have 7 per cent of your investments in gold. If Indian finance minister P. Chidambaram is to be heeded, you should stop buying gold altogether; gold imports have added enormously to the current account deficit. In 2012-13, the country imported 845 tonnes of gold worth $88.2 billion.

The wise men will tell you that gold is an unproductive investment. In the villages of India – where other investment options are limited – gold has been the traditional hedge against inflation. True, it is not always going to rise; there have been periods when the gold price has registered sharp falls. But over the medium and long term, it always delivers.

Chidambaram is blaming gold imports for all his woes. But if economic policymaking had been better, inflation would not have been so high. Equity would have been a better deal than gold.

The charm of gold is such that even government bodies are succumbing to godmen's dreams. The Archaeological Survey of India and the Geological Survey of India hotfooted it to Raja Rao Ram Baksh Singh's fort in Unnao after 'seer' Shobhan Sarkar told a Union minister that 1,000 tonnes of gold were buried nearby. Only rusted iron and glass bangles have been unearthed so far.

“Temples under siege after seer’s dream sparks Indian gold rush,” reports The Telegraph, UK. 'Temples close to Lucknow in Uttar Pradesh are under siege from thousands of shovel-bearing prospectors hoping to find gold in their surrounding grounds.'

The lure of gold has an irrational side. But for most Indians, it is the choice of vehicle for retirement savings. According to a study by Towers Watson, a leading global professional services company, gold is the preference of 64 per cent of Indian retirement savers. This is the organised sector; if you take rural India, the figure will be much higher. Another 41.4 per cent have jewellery as their vehicle of choice. In China, bullion is only 25.2 per cent and is much below bank deposits and mutual funds (see box).

The survey throws up some other interesting findings. “Approximately 90 per cent of workers in China and 80 per cent of workers in India expect to retire at age 60 or younger,” says the report. Yet they don't see any great reduction in their purchasing power. This is not because of their savings. Indians don't retire; they have nothing to do with their lives beyond work. In this country, encore careers start many years before retirement. A subeditor is a priest in his spare time; a government employee is a fixer all the time. Besides, even if the joint family is disappearing in the cities, the son of the house very often stays with the parents (even after marriage) or provides for them.

India (24 per cent) and China (35 per cent) have high rates of savings. “It is hard to envisage a retirement crisis,” says the report. “However, there are clear risks in translating these savings into a comfortable standard of living in retirement, as they are often kept in illiquid and short-term instruments that may not provide a long-term hedge to inflation.”

The trouble with retirement in India is that companies rarely go beyond the statutory requirements. This is often hopelessly inadequate. Indians also have two big-ticket spending requirements when they are close to retirement. The first is the purchase of a house and the second a daughter's marriage.

An additional problem is that other more sophisticated 'savings' avenues may have riders you are never told about. Medical insurance is a case in point; you are covered for Rs 5 lakh but find you can claim only Rs 2 lakh because of the fine print. Insurance and mutual fund advisers are more bothered about their cut than telling you about the product that best suits your needs.

Experts say you need to start planning your retirement the day you get a job. Unfortunately, if that’s your time horizon, you will probably be a failure. If you are dreaming of hanging up your boots before you have put them on, you will end up spending your life in bathroom sippers.

THE LURE OF

GOLD

How Indian and Chinese employees save for retirement (%)

India

Gold/Silver – 64.0

Insurance – 58.4

Mutual funds/Pension plans – 51.6

Jewellery – 41.1

Equity – 36.7

China

Bank deposits – 82.9

Mutual Funds/Pension plans – 66.6

Insurance – 57.4

Equity – 51.5

Gold/Silver – 25.2

Source: Towers Watson’s Savings Attitudes Survey (India and China)