Hedging the gold monetisation scheme

Abstract

While the government is exhibiting sincere attempts to monetise gold, unusual rise in gold prices could increase repayment burden The prices of gold, globally, are collapsing, and according to reports from the market, Indian buyers are purchasing large quantities of gold. The prices are at a five-year low, at $1,100 per ounce, and as per experts, close to the marginal cost of producing gold. The fall in price is mainly because of various factors such as strengthening of the dollar and, consequently, the shift of preferences from gold to the dollar, and also lower purchase of gold by China.

Earlier, in 2013, the government had curtailed imports of gold as the external sector was indicating a weak position on account of rising CAD. The stringent measures yielded results and helped in reducing the CAD, which was down to 1.3% in 2014-15 from 4.8% of GDP in 2012-13. Although numerous ways to control demand for gold in India had been attempted for several years, these did not help in reducing gold imports but rather resulted in thriving black market. However, recent attempts to curtail the demand for gold seem to be showing positive developments. Read more at: https://www.financialexpress.com/opinion/hedging-the-gold-monetisation-scheme/112711/