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Gold schemes draw lacklustre response so far

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Two of the government’s high-profile schemes launched with the aim to reduce demand for physical gold and rein in the current account deficit have so far yielded modest results, signaling lack of clarity and volatile prices of the yellow metal.
According to traders and experts, while the schemes fare better than existing options for gold, wider involvement of jewelers and a clear communication on the tax structure could improve response as days go by.
T he Gold Monetisation Scheme (GMS) launched by Prime Minister Narendra Modi two weeks ago, to monetise part of the estimated 20,000 tonnes of gold lying idle with households, has been able to bring in only around 400 grams of gold.
The gold bond scheme, the first tranche of which closed on Friday, has raised about Rs.150 crore, according to people familiar with the development. Through sovereign gold bonds, an investor gets an annual interest of 2.75%, apart from the benefits of the market price of gold on maturity.
“Currently only gold hallmarking centres have been notified as the collection points. Hallmarking centres were essentially doing business-to-business activities, customers don’t know much about them and so may not have trust to deposit their precious gold,” said Keyur Shah, CEO, precious metals business at Muthoot Pappachan Group.
There are currently around 350 hallmarking centres, against 13,000 jewellers who sell hallmarked jewellery. Shah said it is necessary to involve jewellers and make them gold collection points since they have a good network with customers.
“Buyers need to be educated about the benefits. This was absent as jewellers did not have the incentive to sell the scheme,” said Sreedhar GV, chairman of All India Gems and Jewellery Trade Federation.
On the gold bond scheme, distribution was a problem as only select banks, post offices and some non-banking finance companies were allowed. This would require people to furnish documents that would have revealed the source of the gold bought. “This had deterred people from stepping forward,” said Manish Jain, chairman of the All India Gems Jewellry Trade Federation.
When the GMS was first announced, the price was fixed at Rs.2,684 per gram, which according to the RBI was based on the simple average of closing price of gold of 999 purity in the previous week (October 26-30). But since then, prices have actually fallen to about Rs.2,550 per gramme.
Hindustan Times, New Delhi, 21st Nov. 2015

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