Indian Government Gold Schemes Destined To Fail

The new schemes are aimed at monetizing some of the huge amounts of gold believed to be in private hands in India – in particular some of the religious temples have huge hoards of gold which have been built up over the years. The idea is to give gold holders a way of generating income from their bullion holdings, although the general distrust of the economic system which prompts Indians to hold gold in the first place will indeed likely have a limiting impact on the take-up.   Lawrie Williams, LINK

The India Government is rolling out a plan designed to coerce Indians into putting their gold into banks in exchange for receiving interest on the gold deposits.  The “Gold Monetization Scheme” and “Gold Sovereign Bond Scheme” are both aimed at “monetizing” the gold held by private citizens.  But why are the banks in India interested in getting ahold of the massive amount of privately held gold in India?  In reality, these “schemes” are nothing more than a thinly disguised “scheme” to implement a fractional gold system.

I highly suspect that the Fed/U.S. Government was instrumental in pushing this plan through the Indian Central Bank and Finance Ministry.  India will import at least 1,000 tonnes of gold this year (easily over 1,000 tonnes when smuggling is considered).  This is putting extreme stress on the ability of the western Central Banks/bullion banks to source gold that can be delivered into the big eastern hemisphere buyers, who require and demand physical delivery.

It’s in the Indian DNA to buy and hold possession of gold in all forms.  They have inherent distrust of the economic system, which is why they buy and hold physical gold in the first place.  In fact, as the article linked above references, there’s been a gold deposit program in place since 1999 but has attracted only 15 tonnes since its inception.

Exchanging gold in hand for a piece of paper that promises the payment of interest plus the return of that gold at a specified date in the future leaves the investor exposed to a high degree of counterparty.  Unquestionably the Indian Government wants to this gold so that it can turnaround and lease it to the western Central Banks, who are in desperate need of a steady supply of gold to deliver to China.  As for the extreme degree of the counterparty risk involved, just as the German Government…


7 thoughts on “Indian Government Gold Schemes Destined To Fail

  1. I lived for some years in Dubai which has huge Indian and Pakistani expat communities. I saw with my own eyes how they were buying gold during their religious festivals. The first time I thought the jewelry shop was being robbed and I wanted to call the police. I cannot imagine these people to give away their gold for some crappy paper. For them gold has the status of their gods. They know it will bring misfortune if they trade their gods for paper!

  2. The author is correct.And reportedly,the LBMA has a shortage of 2200 MT Refinery Gold!
    But India’s Land Acquisition Bill,use of Credit Cards for ushering in a Cashless Society and Capital Control on Gold,Silver and Cash etc have another aim.DENY THE RIGHT TO PROPERTY!
    The Indian Citizens will not be able to preserve their MEAGER wealth.

  3. This new guy in charge seems to have bought the whole US playbook. He is also handing over his country’s agriculture to Monsanto and GM crops.

    It seems India is breaking away from the BRICS and aligning with the U.S. He is achieving this using very social and religious positions that play well to the Hindu community. I think they are getting played. He is here in the UK and our govt is fawning all over him. Looks like it’s a bit of a western coup.

    They must be out of their minds if they give up their gold for paper.

  4. MODI…… a ‘kool ade’ drinker…He has sided with ‘evil’ and when the people of India awaken from their idolization of him….he will not be treated as Gandhi was…..imho

  5. This is useful and explains why the people of India prefer holding gold over holding Indian Rupees

    India started minting its own coinage in 1950, so if you input 1950 as the starting year and 2015 as the ending year and input the number 1 in the earnings column, you can see for yourself that one rupee in 1950 had the buying power of 9.89 rupees of 2015. Also of note is the inflation rate from 1950-2015, 880% over 65 years! Heck, its no wonder why the people of India love-Love-LOVE gold! I would too if I had to live under such steep inflation levels.

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