I used to listen to Mr.Feroze Azeez interviews long time back. His version was not to invest in Gold as this was not a productive asset. Anyways, this article is interesting.
Instead of selling 100 grams, why cant they make Gold deposits with Bank more popular.
Gold Monetization Scheme - Not many people know this. This should be made available to all branches of Banks. Bank staff themselves are not aware of this product. This should be encouraged which will ensure instead of selling gold, people can deposit gold into Gold Account and get interest.
Another option is to increase the FCNR deposit rate. This will ensure NRE customers to remit more.
Bank staff has no time to weigh your gold and check the purity of it. I have seen bank staffs wasting away their whole day on inefficient paper work in a digital age and not even interested in helping people. The existing Retail Banking System cannot handle the existing Gold Monetization framework efficiently in its current form.
What is a workable solution ?
The RBI should license an entity like Zerodha to get this Gold Monetization v2.0 done. Because, Zerodha has proved its trustworthiness and efficiency to the country in getting a complex job done with less complexity. They can get the job done better than the existing banking system that will encourage even the small gold savings to flow into the monetization framework. A trust that they can do this with no errors and traps.
Zerodha can De-materialize these physical gold savings of the citizens to gold ETF’s or EGR’s. Let them auction it off to Jewelries that needs this physical gold. Investor gets the gold converted at International Gold Price, the auction gets done at a premium value because jewelers will be saving on 15% import Duty by procuring the gold locally, The premium from the auction will cover the cost and profits of the Intermediaries…
Financial patriotism? Lol. Ain’t gonna help though. It’s a endless sink hole dug by the government via it’s various nepo policies, fostering a despicable ease of doing business environment. if people bail out the government now, it’ll never change and the next time will be even worse. An economic disaster is the logical result of it’s policies. It was never a matter of “if” but “when”.
On the other hand, I think this might be a prelude to government trying to confiscate private gold something akin to executive order 6102. Notice how it said not to buy Gold for a year but then didn’t believe the people to follow their recommendation and increased the duties. This “might” be similar - carrot and stick. I think government might restart SGBs before that. Gold prices are stable and SGBs might not be a bad bet for the government now. But a fundamental change of policies of government probably need a economic disaster.
Nice thought and it should have govt guarantee. if not, not possible. I was considering only because it was a Nationalised Bank even private bank I will not trust (this is me though) . Or, the Gold should be placed in demat account - CDSL/NSDL
Absolutely stupid thought. There is no guarantee that selling your gold now for patriotic reasons will not repeat this plight due to then govt actions in the future. The real issue is the trust deficit between the govt and the people and until that’s settled people won’t sacrifice anymore until the emergency hits the ordinary person’s door… So a hard pass to this idea of selling gold as far as I am concerned…
For me the best option at the moment for the govt is to allow people to exchange their gold for cash without any receipts or tax event. This might sound black trade for some but actually just the good old barter system. Imagine when in emergency I will not think about the tax rather would focus on settling in my bills. Govt is saying - even in emergency you should pay the tax on your gains which simply doesn’t make sense. Make the domestic gold selling receipt free and in cash and see the magic. The money will remain in the country, more gold will come into circulation in domestic market, import bill of gold in USD will get slashed big time. A simple trade of the for govt really vis a vis the forex they have to spend for importing gold. But you know the governments are headstrong. They will do the right thing at the end when they have tried out everything else…
Scheme failed mainly because Indians household hold gold as jewellery, and are emotional about it. Very small % is held as coins or bars.
Depositing it means loosing the jewellery (you get back gold on maturity, not original jewellery)
So people would rather take a loan against their gold (which keeps jewellery intact) then putting it here.
So I would say there is no real product market fit.
