Saturday, September 12, 2015

What On Earth Is India Doing With All That Gold?

We've looked at the Indian love affair with the shiny stuff many times over the years, some links below.
From FT Alphaville:

Aapka gold chahiye
Yes, as you can probably tell this is the news that India’s government wants to get the masses of idle gold lying dormant in vaults and households throughout the country out into the open.
To put that in Zerohedge-ese it’s the The Start Of India’s Gold Confiscation.

Or, to put it more simply… it’s a reasonable (if poorly executed) attempt to cut India’s crazy large (CA hurting) gold import bill by tapping into the estimated 22,000 MT of gold knocking around its temples etc.
For reference, from Citi, “India’s gold imports stood at US$34.3bn or ~900 tons in FY15 and in the not too distant past (i.e. FY12) imports had been as high as US$56bn, or over 1,000 tons.”

In order to get that down by getting domestic gold out and usable it’s setting up two schemes — a sovereign gold bond scheme and a more general gold monetisation scheme. As Citi summarise, “the issuance of sovereign gold bonds is aimed to curb the domestic demand for physical gold among investors, and the gold monetization is aimed at enhancing the domestic supply of physical gold for jewelers etc.”

And here’s Nomura with the broad points on both:
Features of the sovereign gold bond scheme
 Denomination: Sovereign gold bonds (sovereign guarantee) will be issued in rupees and denominated in 5, 10, 50 and 100 grams of gold.
 Interest rate: The interest rate (~3% according to CNBC sources) will be calculated on the value of gold at the time of investment. Officially, interest rates have not yet been announced.
 Redemption: Redemption will be in rupees (cash) only. At the time of redemption, the depositor will have the option to roll over the bond for three or more years, in case gold prices are lower....

From August 2014:
Try Doing This With Your Fiat Currency: "Indian man creates $200,000 shirt made out of gold"
Back in 2013 it was:
"India might buy gold from citizens to ease rupee crisis"
India's Central Bank Reiterates "We won't take Temple or Shrine gold"
Reserve Bank of India Launches Inflation Bonds to Reduce Demand for Gold
Largest (English language) Paper in Largest Gold Market: Time to Sell Gold Not Buy
As Indian Central Bank Restricts Gold Imports Spot Falls to a Three Week Low
"No Gold Rush in India After Latest Plunge"
Ahead of Hindu Holy Day Warnings on Gold Purchases and Discounts on Coins
"Chatter That India Will Ask IMF For Help"
"India and gold (1): jewellers in a desperate spot"
"India and gold (2): gold loans on the up"

"India and gold (4): demand softens this Diwali"
Hmmmm.... "Indian Jewelers Offer BMWs, Discounts to Lure Gold Buyers"
India: "Holy man's dream leads to government hunt for $40b gold treasure"
Somehow related:
Can Hindu Deities Open Brokerage Accounts Allowing them to Trade Securities?

UPDATE: Bombay High Court Rules Hindu Deities MAY NOT Trade Securities
No demat accounts for Hindu gods...
Indian Central Bank Issues Guidelines on Dematerialized Gold in Effort to Reduce Need to Import Physical
And many, many more. Use the 'search blog' box if interested.
Sripuram Golden Temple: