Is it time to reset the gold ‘bar’?

While international market is monitoring closely the possibility of curbs on gold imports, jewellers are looking at how their trade will gain or lose once the US Presidentelect Trump assumes charge.

It is interesting to note the post-demonetisation perspectives shared by Frank Holmes, CEO of US Global Investors on a website. Giving credence to the rumours, Holmes believes that “concerns over the potential gold import ban are prompting some Indian gold traders to place bulk, short-term orders of gold. The uncertainty in the Indian gold market, after the ban on high-denomination banknotes last week, is exacerbated by the threat of an import ban, and wild swings in the gold price are likely.” 

Observing that PM Modi is taking a “big political gamble,” owing to the upcoming elections next quarter in India, Holmes has said “it is all a political manoeuvre (Modi) vowed to go after corruption - he is a maverick politician like Trump.”   

And while researcher and well-known analyst Nigam Arora thinks if the ban should occur, gold could fall $200 an ounce on a given day, Holmes forecasts that it would be more along the lines of a potential $100 decline and then the metal should reset itself. 

Leading exporter Uday Kumar Vummidi, citing the oft-referenced Arora’s research results, said “lot of speculation exists now and the international chatter on twitter and market circles is happening frantically.” From reaching the highest premium of $12 per ounce since November 2014, the fluctuating $30 to $40 per ounce crash in a week’s time simply presents the contradictions that the market is currently witnessing. “We still have to wait and see how the policy comes into force – whether the regulation is applicable to household or individuals. Also, it is not possible to prevent anyone from holding on to the yellow metal in whatever quantity…only thing is an accumulation beyond specified limits will be subject to wealth tax norms,” he said. 

Some of the leading players in gold in the metro have been doing business for generations. Speaking on condition of anonymity, one of them said “there is unnecessary panic being created among public. Rules clearly stipulate that a woman can hold 600 gm (75 sovereign) of the yellow metal while a man is entitled to possess 250 gm (31 sovereign).” 

“Gold is the strength of this country. Without the yellow metal, no marriage is performed es pecially in South India. Barring Bengaluru, where the migrant population is more, the other three southern states have a tradition and culture of saving. The saving habits in Tamil Nadu, Kerala and Andhra Pradesh is quite different than in Bengaluru,” says a third-generation trader, who has travelled the globe and knowing all the nuances of the gold trade. 

He says, the moment a girl child is born in a middle-class family, immediately the tendency is to start investing in gold “little” so that when she attains adulthood, the potential of having accumulated 18 gm gold is a certainty. That is how the salaried class operates and the yellow metal is the only saviour in crisis times, when liquidating it as a “last resort” helps to tide over troubles, he opined.