Is increasing gold prices making India rich or depreciating rupee making India poor ?

This appeared as a Yammer Post in my company's network. My reply to the above question is given below.

If your life depends upon consuming gold then increasing prices makes you poor. Your costs will go up and you will have to reduce expenditure in other areas.

If your consumption depends upon exchanging rupees for the gold then a depreciating rupee [against what? the $?] will be one of the reasons for an increasing price of gold.

Fiat currency is a farce and will always depreciate due to

1. Deficit spending by governments all over the world. A policy they learnt from the scamster John Maynard Keynes.

2. Nixon's delinking of the $ to gold and the collapse of the Bretton-Woods system.

The price of Au makes no difference to the economy since

1. Gold is a store of value and not usually a raw material in the economic ecosystem. Therefore we do not have to constantly consume it like Petrol or Food or any other source of energy.

2. It is not as widely used as a medium of exchange like the rupee which is fiat currency - both can be easily represented in paper or electronically.

Fiat Currencies depreciate due to their increased numbers. More paper (money) chasing goods. The law of "Demand and Suppy" demands this.

Due to the overuse of government and forgery printing presses the number of "notes" increase. Over time this is reflected as inflation. Right now we have huge inflation and a depreciating rupee. This is observable anywhere. Just look at what happened recently in Zimbabwe.

Governments all over the world practice deficit spending to pander to their electorates. Those who do less of it will see their currencies depreciate at a lesser rate. This is reflected in the varying currency rates in the forex markets.