VITALINFO: Worth trying scrap gold

VITALINFO: Worth trying scrap gold: My View on   " RBI restrictions hit gold flow to Bangalore ":  The issues raised here are very relevant. The inherent fear...


 Comments posted in response to an article on gold published in Mint on April 24, 2014:

The inherent fear to touch or talk about the huge domestic stock of gold in India is behind the artificial scarcity of the yellow metal and all concomitant problems like smuggling, unrealistic pricing and so on.
The fear of gold was captured by K U B Rao in his report on Gold Management repeased in January, 2013 in the following words:
“Indians’ obsession for large investment in physical gold is the outcome of the confluence of numerous and divergent factors. Given the complexities involved in the lure for gold in India, a holistic strategy that deploys a combination of demand reduction measures, supply management measures and measures to increase monetisation of idle gold stocks needs to be put in place. Creation of an alternative asset class that may provide returns comparable to return on investment in physical gold with similar flexibility is important. A necessary pre-condition for reducing the excessive demand for the precious metal is to ensure benign inflationary environment along with achieving and maintaining macroeconomic stability.”
If there is a will, there should be some way, to exploit productively at least a small portion of the domestic stock of gold which will minimise the need for gold import. There is no escape from standardising a major portion of non-jewllery surface gold and making it available for productive purposes. When every other asset can be accounted, government cannot be apologetic only about gold.  Establishment of the Bullion Corporation of India proposed by the Working Group can play a major role in recycling and pooling of domestic scrap gold. In this context, the Committee’s following observation is relevant:
“ Temples in India holds large quantities of gold jewellery offered by devotees to the deities. There is also significant amount of scrap gold in the country. Some estimates say that scrap gold that comes into the system is nearly 300 tonnes per annum. It would be worth trying to channel the existing supplies of scrap gold in the country into the financial system, so that the unproductive nature of the gold asset is turned into a financially-productive medium.”
M G WARRIER, Thiruvananthapuram



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