Bullion experts propose separate gold saving account to promote paper gold

In a bid to promote paper gold in India, bullion experts have proposed a separate gold saving account along with the rupee saving bank account for consumers.

Deliberating on the issue in a webinar organised by Assocham, Somasundaram PR, managing director, World Gold Council (WGC) India, said, "Consumers should be given an option with separate gold saving account along with the rupee balance account in banks to enable them to transact directly in the bullion.”

Currently, transaction in paper gold is available in the form of exchange-traded fund.

Various stock exchanges also offer 1 gram gold trading facilities to attract participation from retail consumers and on delivery, such gold can be transferred to vault.

The Central government's 'sovereign gold bond' with 2.5 per cent of annual interest with benefit of price appreciation to investors are also a form of paper gold.

“The gold saving account will be different from all these instruments whereby account holders would be allowed to transfer, redeem or receive physical gold of the quantity they accumulated over the period,” said Rajesh Khosla, Chairman Emirates, MMTC Pamp, India’s sole London Bullion Market Association (LBMA) approved gold refinery.

“Import of gold has declined to less than 10 tonnes in the last three months between March - June. Investors are going more towards paper gold. This is the time to go for investment in paper gold without getting worried about physical gold,” said Khosla.

Indian consumers have been buying paper gold in the form of ETF and SGB during nationwide lockdown.

“Consumers have started coming back to buy a piece of ornaments or bullion after the government allowed jewellery stores to open from June 8. While consumers are coming to stores with exchange of scrap jewellery with new ones with addition of few additional grammage to their purchase volume. Also, new gold purchase has also started despite sharp increase in gold prices,” said Dileep Narayanan, Head Bullion and Treasury, Malabar Group.

On gold price outlook question raised in the webinar, Hemant Thukral, Head (Derivatives Strategy), Aditya Birla Money, said, “Gold price in India is driven by international factors including global economic uncertainty, ongoing geo-political tensions and US Fed’s interest rate cut. We expect gold prices to move further up to trade at Rs 65,000 per 10g in India in medium term.”

Gold has witnessed a remarkable run so far this calendar year with the benchmark standard gold price in the physical markets surged past Rs 48,000 per 10g now from the level of Rs 39,300 per 10g, thus offering a return of over 22 per cent in the last six months. In the international markets, gold price is approaching $1800 an oz from the level of $1200 an oz around a year ago.

“A portfolio with gold has always yielded higher returns than a portfolio without gold,” said Somasundaram.