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Indian Government Talks Down Gold
In a sign of things to come from governments around the world a worried Finance Minister Pranab Mukherjee expressed frustration at the amount of savings being invested in gold and said there is a need to spread financial literacy to encourage people to invest in market instruments.
Pointing out that India’s gold imports surged to $60-62 billion in last fiscal year, the minister regretted that people are investing in gold with the expectation that the value of their investment would appreciate.
“Quantum of import of gold … is a clear indication that a large section of the community … wants investment in a dead asset only with expectation that the value would appreciate,” he said while speaking at a Zee television award function.
The minister further said, “Time is ripe to motivate our educated upper middle class to climb from saving mode to wealth-generation mode. …
“My request to financial analysts and other experts and leaders in this field is to ensure than we can create confidence in the market, spread financial literacy, and the merit of investment could be widely spread,” he said.
The minister added that the government is committed to make India an investment-friendly destination and financial powerhouse of the world.
“If India can build on its economic strength, it can be a source of stability for the world economy and safe destination for restless global capital, which can help speed our developmental process,” the minister said.
On the economic issues, the minister said, “the most important challenge before the country is to regain and then sustain 8-9 grwoth per annum.”
At the same time, Mukherjee said, there is a need to maintain the basic parameters of healthy development, a moderate rate of inflation, fiscal consolidation, and current account deficit and obviously higher growth in exports.
While asking financial analysts and experts to educate investors, Mukherjee cautioned: “We need to put investors’ interest in forefornt. If we lose the interest of potential investors, growth will be stalled.”
He further said inputs of experts on policy correctives and reforms have helped the government to “move forward.”
“We are now on to the next generation of financial sector reforms, which include, among other things, widening and deepening the Indian security markets as part of concerted efforts to increase the participation of retail investors in the security market and further the goal of financial inclusion,” he said.
In order to check gold imports, the government has increased the basic customs duty on gold bars from 2 per cent to 4 per cent.