05 January 2015

India gets serious about anti-gold policy

It seems the talk of getting Indians out of hoarding physical gold and into deposit schemes (see this post on WGC/FICCI proposed gold policy) is reaching the highest levels with reports last week that Indian Prime Minister Narendra Modi called "upon banks to convince people to channel their savings away from gold into financial instruments" by convincing "people that a bank is as safe and as reliable as they perceive about gold". Good luck with that, but we shouldn't underestimate the Government's resolve and the resulting impact on gold.
I note that this article also makes reference to a policy to converting India into a cashless economy. I think this is less about improving productivity as Modi is quoted as saying, and more about eliminating the cash economy and increasing government revenue. Gold is part of that cash economy and hence this gold mobilisation move is also about targeting black money.
Even if these measures don't work, the scheme to "to provide all citizens with bank accounts" would have some impact on gold demand at the margins. Probably the only thing that would really help to kill gold demand in India would be as RBI governor Rajan was quoted as saying (and he obviously understands the real issue why Indian's hoard gold) making "positive real interest rates, i.e., yield higher than inflation rate, the cornerstone of his monetary policy-making." That is going to be a tough ask.


  1. As per your previous post re India & WGC sponsored report, the 'deposit schemes' they have in mind are modeled upon the device crafted by the devious dervishes of banking in Turkey.

    From the internet application page of one of the state-owned banks there comes this jewel of double-speak designed to defraud the unwary customer not alert to semantic hijinks!

    *Gold bought and sold through these accounts is of 1000/1000 purity. Announced gold prices are prices for 1000/1000 purity gold.
    *Physical gold delivery is not available during account opening or transactions.
    *Similarly, physical gold payments may not be made.

    In the case of India, where a much higher proportion of potential victims, err, customers are not literate, one can only imagine the field day these shysters will have with their 'verbal' guarantees prior to the "marks" leaving their mark pon page!

  2. The 'New Brown hope of India' > Modi or whoever?,are not servants of the Indian people..full stop!

    Yes they understand Indian culture but their IMF masters do not!.

    No GOLD! = No WEDDING....capice??.

    The Indian people and the Chinese people remember how the 'Raj' destoyed the silver Rupee and how the British destroyed the Chinese silver monetary system.

    Wall street and Canary Warf cannot overide thousands of years of culture,only the stupids of the 'Bretton Woods' subscribers believe in fiat paper...good for taxes,but little else.

  3. Right on, Rajan. A century ago, 1 rupee = $US 10, now 1c.
    Until RBI/Govt arrests this extraordinary debasement gold will flow to India officially or otherwise.