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RBI Advises Against Gold Investment
From The Times of India, Mumbai
Friday, September 7, 2012
http://timesofindia.indiatimes.com/business/i...BI-advises-a...
MUMBAI -- On a day gold prices touched a new high, the Reserve Bank of India urged the public against choosing gold as an asset for savings or investment.
"Because interest rates are very low, people are investing in gold. But the poor
should never invest in gold, for whenever they have purchased gold, it either lands up in the
temple or in the hands of the moneylender or, at most, it
may be given away during
a daughter's marriage,"
said RBI Deputy Governor K.C. Chakrabarty.
Speaking at a function
that marked the eighth edition of the M.R.Pai Awards, given in memory of the founder
of the All-India Bank Depositors
Association, Chakrabarty said
that this is one area in which the
association needs to educate
the public.
"How many poor people," Chakrabarty asked, "have managed to save money by buying gold? Banks are selling
gold, but do they buy it back? And if they do, at what price?"
The deputy governor added that the $60 billion worth of gold India imported annually was one of the main reasons behind the current account deficit.
This is the second time that the deputy governor has spoken out against investing in gold. At an event in Delhi in July, he said that there
was a need
for a socio-cultural revolution to help Indians overcome their love for gold.
India is
the world's largest
consumer of gold and is estimated
to have imported close to a thousand
tonnes in 2011. Although
imports have dropped following
the increase in customs duty
in the 2012 budget, the value of imports continues to remain
high thanks to the rise
in prices and the weakening
rupee.
Despite the import drop, domestic gold prices continue
to rule high with the yellow metal being seen as a strong hedge against inflation.
Chris Powell
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