Friday, April 17, 2015

Always better to encash the hoarded stocks of Gold

The article reads well and offers lot of technicalities to understand the risks involved in the bold bond scheme and the comparative advantages of Gold bond scheme and mobilisation of deposits through monetisation of gold. Being theoritically strong in the argument by taking all possible precautions the Government should expedite its proposed approach to bring the hoarded gold stocks into the market either by way of deposits or outright purchase on a price fixed by the government without any taxes to be levied from the sellers. The physical gold comes to the Government and this should be available to hedge the future fluctuations in prices in case the Government  faces price risks  with the backing of Gold.In any case the objective behind the FM's policy behind issue of Gold bonds and acceptance of gold as deposits is to find resources for the infrastructire development and this should get priority over other nuances and if and buts of various calculations. The only precaution the Government can perhaps take in this aspect is to ensure that the Gold mobilised is safe and kept with a centralised agency preferably a Gold bank under the control of the Reserve Bank of India.The backing of physical gold at any point of time puts away the fear of upward fluactuations in gold prices and the need to import unnecessary gold at an uncertain cost to the nation. What we now require is cash and we have enough of gold stock available at our command. When butter is readily available the search for ghee is a waste of time, money and loss of opportunities. It is better to encash the gold and take care of the very badly needed infrastructure. The fruits of development would definitely take care of the disadvantages if any.

Dr.T.V.Gopalakrishnan

(This comment is given in Business standard aginst an Article on Gold )

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