India introduces Gold deposit accounts!
India is encouraging its gold-hungry population to invest in gold-backed bonds as it introduces gold deposit accounts to exploit the 20,000 tonnes available within India and launch a sovereign gold bond, according to Arun Jaitley the finance minister said on Saturday, but kept the import duty at the record 10 percent in a setback for jewellers. India is cherishing the savings mindset of millions implanted in households through gold accumulation, and use it potentially to translate gold savings in to economic investments and enhance the Indian economy. Jaitley said gold depositors will earn interest on their gold account, while jewellers can obtain loans on it. Banks and other dealers will be able to monetize the gold. Indian PM Narendra Modi’s government has unveiled a business-friendly budget aimed at attracting greater investment for the economy.
Somasundaram PR, Managing Director, India, World Gold Council, said in a statement: “This budget is exceptional for gold. The proposed policies on gold are a step towards making gold a part of the larger financial system and a tradable under contract asset class.
“India will now be able to set in place a measured monetisation framework for gold from the existing stocks in private hands worth over $1tn. “Standard India gold coins will ensure gold availability aligned to customer preferences and will help in curbing the black unofficial market”. Over 1000 tonnes of gold finds its way to India every year.
However, gold buying remained strong in China, the second-largest consumer. Premiums on the Shanghai Gold Exchange were at $4-$6 an ounce over the global spot price this week as Chinese buyers returned to the market following the Lunar New Year holiday. Premiums were at $3-$4 ahead of the holiday.
In moving towards recycling of gold held in households and temple trusts for years, BJP’s Arun Jaitley signalled the Indian government’s intent to cut shipments into the world’s top consumer of the metal. Massive gold imports often misrepresent India’s trade balance.
Prithviraj Kothari, executive director of the India Bullion and Jewellers’ Association said “smuggling could rise 20-30 percent in 2015 from the estimated 175 tonnes last year”.
| Ranking | Country | Tonnes of Gold | % of Reserves |
| 1 | United States | 8133.5 | 72 |
| 2 | Germany | 3384.2 | 68 |
| 3 | International Monetary Fund | 2814 | NA |
| 4 | Italy | 2451.8 | 66 |
| 5 | France | 2435.4 | 65 |
| 6 | Russia | 1168 | 10 |
| 7 | China | 1054.1 | 1 |
| 8 | Switzerland | 1040 | 8 |
| 9 | Japan | 765.2 | 3 |
| 10 | Netherland | 612.5 | 54 |
| 11 | India | 557.7 | 7 |
| 12 | Turkey | 523.8 | 16 |
| 13 | European Central Bank | 503.2 | 27 |
| 14 | Taiwan | 423.6 | 4 |
| 15 | Portugal | 382.5 | 79 |
| 16 | Venezuela | 367.6 | 69 |
| 17 | Saudi Arabia | 322.9 | 2 |
| 18 | United Kingdom | 310.3 | 11 |
| 19 | Lebanon | 286.8 | 22 |
| 20 | Spain | 281.6 | 24 |
| 21 | Austria | 280 | 42 |
| 22 | Belgium | 227.4 | 34 |
Source World Gold Council
Three gold loan companies in Kerala have more precious metal in their vaults than the gold reserves of some of the richest nations. Muthoot Finance, Manappuram Financeand Muthoot Fincorp jointly hold nearly 200 tonnes of gold jewellery, which is higher than the gold reserves of the following countries.
| Ranking | Country | Tonnes of Gold | % of Reserves |
| 23 | Philippines | 194.79 | 24 |
| 24 | Kazakhstan | 184.026 | 25 |
| 25 | Algeria | 173.63 | 3 |
| 26 | Thailand | 152.44 | 4 |
| 27 | Singapore | 127.42 | 3 |
| 28 | Sweden | 125.78 | 8 |
| 29 | South Africa | 125.21 | 10 |
| 30 | Mexico | 123.1 | 2 |
| 31 | Libya | 116.6 | 4 |
| 32 | Greece | 112.4 | 69 |
| 33 | Bank for International Settlements | 111 | NA |
| 34 | South Korea | 104.4 | 1 |
| 35 | Romania | 103.7 | 9 |
| 36 | Poland | 102.9 | 4 |
| 37 | Iraq | 89.8 | 5 |
| 38 | Australia | 79.9 | 6 |
| 39 | Kuwait | 79 | 8 |
| 40 | Indonesia | 77.1 | 3 |
India accounts for 32% of the global demand for gold, a means tested insurance for millions of families that have little access to other forms of social security. Kerala, is the southern most state of India, where 200,000 people are employed in the gold industry. Gold is as rock solid an investment as triple-A rated Treasuries, adding to a movement that places gold at the top tier of asset classes. Gold is a monetary asset and should be treated on an equal footing with cash and also makes it an ideal collateral for over-the counter short term loans, although its critics argued the market has been too volatile and too small for it to be considered a legitimate currency.
Historically, people from Kerala have excelled in financial services as an ethnic group. The size of these companies reflects their innovative and entrepreneurial skills. Gold loan business also feeds from a strong dowry system.
Muthoot Fincorp has a gold loan portfolio of £ 855m, and then had 41 tonnes of gold in its vaults. “Then, two things happened — gold prices declined and banks became aggressive in gold loans. As gold prices declined, gold collateral business nosedived reflecting on gold holdings,” said Thomas John Muthoot, chairman and managing director of Muthoot Fincorp.
The Royal Mint in UK is encouraging the public to become gold investors with its online bullion trading service that lets people buy and sell gold coins and store them in the Mint’s vaults, guarded 24 hours a day by the Ministry of Defence.
The Mint’s vault service will allow anyone to trade gold and silver coins via its website. The Mint is hoping to cash in on interest in investing in gold by making it as easy as putting money in a savings account. The World Gold Council has suggested there is a potential £4bn latent demand for gold investment within the UK.
The Mint’s trading website will provide constantly updated live prices for gold and silver, so that potential customers would be able to buy at the best possible price “quickly, and securely, round the clock”. The Mint will also give customers a quote to buy back coins bought from its website and stored in its vaults.
Consumers can buy just one silver Britannia coin, worth about £19.50, but will have to store it themselves, as they would if they bought a 22-carat gold sovereign. Those wanting to keep their investment in the Mint’s vaults will have to buy at least 25 gold sovereigns – worth about £4,700. The mint will charge 1% of the value of your gold per year for storage, plus VAT. There is no maximum purchase limit.
Shane Bissett, the Mint’s director of commemorative coin and bullion, said: “We want to help expand the bullion market in the UK, particularly as coins offer a relatively affordable introduction. The Royal Mint is responsible for manufacturing all UK coinage and has long been trusted with the currencies of other countries too, supplying to more than 60 worldwide, as the quality of UK bullion coins is of an extremely high standard which cannot be rivalled. We have been a highly respected and trusted source of coins for kings, queens and governments for over 1,000 years, and this proud heritage is means that we are globally recognised as a reliable source for bullion coins.”
Britannia, Sovereign and Lunar bullion coins are also Capital Gains Tax free for UK residents as they are still considered to be legal tender.