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6:53p ET Sunday, October 23, 2005
Dear Friend of GATA and Gold:
The news story from India appended here shows the
ordinary and candid work of one particular central
bank that, fearing competition from gold, seeks to
discourage gold ownership among individuals and to
steer their wealth into paper financial instruments
instead.
The argument over just how productive and socially
useful gold is as an investment is an old one, but
perhaps even advocates of a system of fiat currency
and central banking will have to acknowledge that
what is happening in India, as described below, is
another skirmish in their long-running war against
gold, their war against any standard of value outside
their control. That war is waged on one front or
another every day.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Freeing of Indian Gold Imports on Hold
as Reserve Bank Puts Spoke in Wheel
By Subhomoy Bhattacharjee
The Times of India / Economic Times
Gurgaon, India
Monday, October 24, 2005
http://economictimes.indiatimes.com/articleshow/1272303.cms
NEW DELHI -- Freeing of gold imports may take some more time, as the
Reserve Bank of India has advised the government to go slow on the
proposal.
This would mean the plan to allow more agents to import the metal to
meet the ever-increasing demand for gold could be delayed beyond
this fiscal year.
RBI has advised caution because there has been a recent spurt in
imports of gold into the country. Since gold also doubles as an
instrument of savings for large sections of the economy, the central
bank is examining whether there is an incipient trend among some
investors to use the metal to hedge themselves, at the cost of
savings in the financial sector.
Addressing the Assocham AGM on Friday, finance minister P
Chidambaram said the government would prefer that investors put
their savings in financial instruments instead of using gold and
other physical assets.
The proposal involved allowing a large number of private importers
and jewellers to directly import gold from abroad. Currently only a
few designated agencies such as MMTC are allowed to import gold
bars. Since 1997 the RBI has authorised these agencies, including
commercial banks to import gold, but only for sale or loan to
jewellers and exporters. At present 13 banks are active in the
import of gold.
Under a decentralised gold import regime, there could be as many as
2,000 importers. The finance ministry and RBI are looking at a long-
term vision of developing a gold deposit market in India. Consumers
could then buy standardised gold of smaller denominations at retail
counters, and could keep them with banks in exchange for gold
certificates.
The development of a more robust market for the yellow metal will
also kill the residual hawala that might be taking place through
gold smuggling because of the marginal premium commanded by the
metal in the domestic market, caused at present by restrictive
imports. A thriving gold deposit market in the future could also
help monetise large amounts of gold lying with households. This
could help divert such savings for productive investments in the
economy.
India is the world's largest consumer of gold in jewellery, with an
annual demand estimated at about 800 tonnes.
While the country exports about 60 tonnes of the metal annually, it
imports about 600 tonnes. According to figures with the Multi
Commodity Exchange of India, the total stock of gold in the country
is about 13,000 tonnes, which is about 9 percent of the world stock.
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----------------------------------------------------
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