The World Gold Council (WGC) said the Indian government’s suggested guidelines on sovereign gold bonds offer choices for investment and incorporate the precious commodity into the regulated financial sector.
Government pushed gold bonds to hold back demand for the physical yellow metal and circulated a discussion paper on said platform to get comments until July 2.
Managing Director Somasundaram PR of WGC India stated any measure that boosts consumer options and makes gold a tradable asset which is an encouraging development.
These gold bonds enable consumers to trade bonds without difficulty on commodity exchanges and using them as loan collateral and capital gains tax incentive.
India is the biggest consumer of gold and imports from 800 to 900 tons of this asset every year. It is the second-biggest product next to crude oil.
The independent gold bond idea suggested by the government has numerous takers. Nevertheless, this can impact the gold exchange traded funds sector which currently face a difficult stage since assets under management are declining and no fresh investments are coming in.
Through this scheme, investors can look forward to revenues higher than physical gold. Aside from gold price returns, they earn one or two extra percent annually.
Assets experts say traders can place money in gold sovereign bonds which is an attractive format. During the last 10 years, India spent $280 billion just to import gold which could have been utilized for development. This amount is equal to overseas institutional investments in the country during the decade.
However, one bullion analyst revealed the government anticipates it can raise $2 billion initially but gold price and FOREX risks should not be hedged. This can turn out as a huge gamble.
Gold dealers maintain that the reserve Bank of India possesses a natural protection for gold commodities and currencies with almost $350 billion in terms of reserves.