From the you-can’t-make-this-stuff-up department by Bron Suchecki, GoldChat
It seems the talk of getting Indians out of hoarding physical gold and into deposit schemes (see this post
on WGC/FICCI proposed gold policy) is reaching the highest levels with reports
last week that Indian Prime Minister Narendra Modi called “upon banks to convince people to channel their savings away from gold into financial instruments”
by convincing “people that a bank is as safe and as reliable as they perceive about gold”
. Good luck with that, but we shouldn’t underestimate the Government’s resolve and the resulting impact on gold.
I note that this article
also makes reference to a policy to converting India into a cashless economy. I think this is less about improving productivity as Modi is quoted as saying, and more about eliminating the cash economy and increasing government revenue. Gold is part of that cash economy and hence this gold mobilisation move is also about targeting black money.
Even if these measures don’t work, the scheme to “to provide all citizens with bank accounts” would have some impact on gold demand at the margins. Probably the only thing that would really help to kill gold demand in India would be as RBI governor Rajan was quoted as saying (and he obviously understands the real issue why Indian’s hoard gold) making “positive real interest rates, i.e., yield higher than inflation rate, the cornerstone of his monetary policy-making.” That is going to be a tough ask.