Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Committee Forming to Establish Indian Spot Gold Exchange

  by    0   0

The World Gold Council has announced plans to form a committee that will help set up India’s first physical gold exchange. Officials say they hope to have the exchange up and running in 12 to 18 months.

The committee will not actually set up the exchange, but will provide guidance. WGC Indian operations managing director PR Somasundaram told Bloomberg the council is in the process of creating an industry committee of jewelry trade associations, dealers, miners, regulators, foreign and Indian banks, and eventually some consumers.

Indians have a love affair with gold. The country ranks as the second largest consumer of the yellow metal in the world. It’s not just a luxury. Even the poor buy gold in India. The yellow metal is interwoven into the country’s marriage ceremonies, and cultural and religious rites. Indians also value gold as a store of wealth, especially in poor rural regions. According to the World Gold Council, Indian households hold over 22,500 tons of gold.

Two-thirds of India’s gold demand comes from these areas, where the vast majority of people live outside the official tax system.  Owning gold provides a vital economic lifeline, especially for Indian women. It allows them to gain access to cash, and even goods and services, during difficult times.

The exchange would allow retail investors to bring their physical gold to formal financial channels and make it easier to monetize it. According to the WGC report, a physical exchange would enable jewelers, retailers, refiners and banks to trade over a regulated platform.

While banks’ widespread network and trust factor are essential to facilitate retail investors to bring their gold to formal financial channels, the spot exchange can be a key enabler for the success of these efforts.”

Only China consumes more gold than India. But officials say despite the size of the Indian market and its significant global position, it can’t realize its full potential. Officials say a formal exchange will boost transparency and streamline bullion trading. The goal is to ensure standardization, facilitate better price discovery, bring unorganized players into the formal sector, and to give consumers better access to supply. According to the WGC report, “Given the broad push for greater transparency and appetite for reform, the time is opportune to introduce structural reforms.”

How average Indians will view a formal exchange remains to be seen, especially in rural areas. Large segments of the Indian economy operate underground. The government has aggressively pushed stop it.

Many Indians thwarted a government policy to bring the underground economy out of the shadows by converting their “black money” into gold.  Last fall, the Indian government announced a surprise demonetization policy meant to drive so-called black money out of the shadows, declaring current 1,000 and 500 rupee notes would no longer be valid. The suddenly worthless notes made up 86% of the currency in circulation in the country at the time. The move made virtually all of the cash in India valueless. In that environment, it’s pretty clear why Indians would want to hold on to their physical gold and avoid any kind of formal system.

Regardless, gold will continue to be an important part of the Indian economy, whether formally, underground or both.

TaxFreeGold.Banner.1000x285

Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

Gold Serving as a Lifeline for Indians During Credit Crunch

Gold has become a lifeline for Indians in the midst of a severe credit crunch. When the state-run lender refused to extend Babasaheb Mandlik credit, he used his wife’s gold jewelry as collateral for a loan in order to buy cotton seeds before the summer sowing season window closed.

READ MORE →

Uncle Sam Is Spending Like We’re In Recession; What Happens When We Really Are?

Last week we got the updated federal budget deficit numbers. At $867 billion, the 2019 fiscal year budget shortfall has already eclipsed last year’s deficit of $779 billion. The out of control spending and spiraling deficits are concerning enough on their own terms, but they become absolutely horrifying when you consider that these budget shortfalls […]

READ MORE →

Yield Curve Inverts Flashing Recession Warning; Stocks Plunge

The yield on the 10-year Treasury fell below the yield on the 2-year for the first time in 12 years, stoking recession fears and tanking stock markets. Yield curve inversions have preceded all nine recessions since 1955.  This was the first time the 10-year Treasury yield has dropped below the 2-year yield since June 2007 […]

READ MORE →

China Adds 10 More Tons of Gold to Its Hoard

the country of china shown on a globeChina bought gold for the eighth straight month in July, adding another 10 tons to its rapidly growing hoard. The recent purchases boosted the People’s Bank of China’s gold reserves to 62.26 million ounces – about 1, 945 tons.  China has added about 94 tons of gold to its stash over the past eight months.

READ MORE →

The Fed Has the US Economy on Life Support

The Federal Reserve has the US economy on monetary life support and Daily Reckoning managing editor Brian Maher says it will never again breathe on its own. As hedge fund manager Kyle Bass put it, the economy is trapped within the inescapable tractor beam of zero percent interest rates.

READ MORE →

Comments are closed.

Call Now