Which US presidential candidate does gold prefer?
Gold loves chaos and should be hitting new highs, especially with inflation coming down and with it, two rate cuts likely before year’s end.
The Indian government’s plan to incent households to hand their gold over to banks in return for interest payments appears to be working.
According to The Indian Express, the government collected 919 crore (USD137.8 million) during the fourth tranche of its Sovereign Gold Bond program, rolled out in November 2015.
“The amount realised through the 4th tranche, at around Rs 919 crore, is the highest achieved as yet. The previous highest was Rs 746 crore in the 2nd tranche when the issue price was only Rs 2,600 per gram of gold. This was mobilised through over 1.95 lakh applications representing around 2.95 tonnes of gold,” a finance ministry statement said.
The first three tranches of the Sovereign Gold Bond program raised 1,318 crore (USD197.6 million). The fourth tranche was launched July 18-22, in consultation with the Reserve Bank of India.
Under the plan, people who own physical gold will be allowed to put their metal into banks and earn interest until it is withdrawn. The idea is to mobilize the thousands of tonnes of gold estimated to be sitting idle in Indian households.
India is the world’s top consumer of bullion, with many Indians placing high value on the precious metal as jewelry, often given as a gift, and as a store of value.
But with little domestic production, India has dependably imported between 700–900 tonnes in recent years (2015’s gross total was a near record 947 tonnes) and going back decades has been the world’s number one importer of the metal; only on two occasions handing the crown to China. The gold monetization plan is a way to keep the metal in the country and avoid a situation that occurred in 2013, when high gold imports pushed India into a record current account deficit of $190 billion.
MINING.com reported earlier this month that following government import curbs and duties (an onerous 10%) and other trading restrictions introduced in recent years, the dynamics in the Indian gold market have been turned on its head.
Gold imports have all but imploded with shipments dropping to to just 130 tonnes year to date. At this rate annual imports could be the lowest in at least two decades.
7 Comments
BeRealPlease
Ok let’s if they get it back Bye Bye
JH
wow, they plough 2.95 tonnes and it pressages a collapse in Indian gold.
A bunch of hyperbole when Indians hold 20,000 tonnes. Wake me up if the Bond Program gets to 100 tonnes.
As gold price increases there will be leakage as the wealth effect kicks in for sure – at $5000/oz the Indians could be the richest country on the planet with $3.2 trillion of real money. Converting to Rupees ..ha ha ..low probability, they’ll buy USD and the good ole will be happy campers to print as much as they can to help out.
David R.(Canada)
A fool and his money are easily parted!
Gene
Says the guy whose guvment has 42oz left in the public trust.
Altaf
Do not get carried away and get excited. The info is a controlled one, it is both true and misleading.
The 20,000 tons of gold owned by Indians is not all to be considered with individuals. Most of it is with Temple trusts. When people visit temples, they give any thing to the temple, cash, gold, silver or any valuable thing. The Temples deposit the gold in banks and it keeps growing. Of course, much more is with individuals too.
Now the news of almost 3 tons deposited is also misleading that people are coming in droves to deposit their gold. There was no response to earlier efforts by successive governments. Govt has to save face, spiced up the terms a little. In parallel it has nudged the temples to deposit their gold into banks. This strategy of focussing on temples has advantage over running after people. They know which temple has how much gold compared to knocking every door of people without the knowledge of who has how much. Govt efforts bore fruit in that a few (less than a dozen) temples have agreed to deposit their gold in banks. When temples deposit their gold, it is in kilos against people who have few grams each. All these temple gold added up to 3 tons.
Now a dozen temples out of millions and 3 tons recycled to supplement annual consumption of 1000 tons can only be a biginning. It can not be called a success.
Altaf
I still do not understand why government want to curb gold imports. Govt has to change its foreign trade calculations by excluding gold import component from import figures. Then the foreign trade looks better.
The concept is gold is wealth. NRIs want to bring their savings earned out of India into India in the form of gold. They buy gold with their hard earned money, they pay customs and they bring gold into India and keep it with them. I dont understand how govt is suffering due to this. The explanation that govt has to spend hard currency for this gold is incorrect. People are spending their own money to buy gold abroad and bringing it in. It does not effect govt. In fact it earns customs. If they create hurdles in the way, it forces shortage of gold in India which creates, premium over LME and encourage negative factors like undeclared assets, smuggling . NRIs are earning money abroad and bringing it in. Govt should not mind if it is in cash or gold. Finally gold is ultimate wealth. Why govt is stopping people from bringing in wealth?
It is all short sighted view that govt is losing hard cash. Actually they wish to arm twist NRIs to bring wealth in hard cash instead of gold so that RBI can fill its coffers. This is a short sighted view. If they have vision, they can restrict gold imports by Industry but let NRI individuals to bring in as much as they wish. In 90s they allowed 10 kg per person per year. Later they reduced it to 5 kilo and now 1 kilo. At the same time they increased customs from 4% in 90s to 10% now. Its like trying to eat the hen which is laying golden eggs.
digriff
I can’t imagine how cold it would have to be in hell before I handed physical gold over to a banker……..I might have been born at night, but it wasn’t last night.