National Coins Coming to Gold-Hungry India
India will soon have its own national gold coins.
Metals and Minerals Trading Corporation (MMTC) will manufacture and market the gold coins, set for release in October.
According to the Times of India, MMTC managing director Ved Prakash said the company plans to produce two gold coins, one weighing 5 grams and the other 10. The coins will feature engravings of Ashok Chakra and the face of Mahatma Gandhi.
While many countries have their national coins, India did not have one. These gold coins will be regarded as the national coin of India.”
The company plans to initially mint 20,000 coins a month, with the possibility of upping output to 50,000, depending on demand.
MMTC officials say they also plan to market the coins overseas in the UK, US, and South Africa.
India ranks second in the world in gold consumption, second only to China, and the populous Asian nation continues to increase it appetite for the yellow metal. Given Indian’s love of gold, it comes as a bit of surprise that they do not yet have a national bullion coin.
As we reported, gold imports into India spiked in August, with 15.78 metric flowing into the country. That compares to 7.2 tons of gold imported in the same period in 2014, an increase of 119%. This continued a year-long trend of increased gold imports into India. According to Business Standard, gold imports in the first eight months of this year are estimated to be 40% higher than last year. Analysts predicted, “By December 2015, the total imports will touch 1000 tons.”
Indians continue to buy physical gold despite government efforts to channel money into paper gold that it can more easily track and control. As we reported in July, the Indian government has encountered stiff resistance as it tries to stop the metal from being used to hide billions of dollars of undeclared “black money.”
Indians, primarily those living in rural areas, drive a strong demand for gold jewelry. Storing family wealth in gold jewelry is deeply engrained in Indian culture. A nationally minted coin represents an intriguing new direction for India’s gold market, providing another option for gold-hungry Indians to hoard the metal.
MMTC officials say they hope to tap gold from a government monetization scheme to produce the coins. The policy allows depositors of gold to earn interest on their metal accounts. But many analysts express skepticism that Indians will readily deposit their hoarded gold in banks. As the Wall Street Journal reports, similar schemes have failed in the past.
Has the government tried this before? Yes. But not with much success. Nomura, a Japanese brokerage, said the gold policy could be a ‘damp squib’ like its predecessor unless depositors get higher interest rates and banks exempt them from regulations.”
As we reported in December, India eased gold import restrictions late last year. The so-called “80:20 rule” was dropped. The regulation required gold importers to reexport at least 20% of their imported gold. As predicted, the move appears to have spurred the second largest consumer of gold in the world to begin to officially buy more gold.
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