The World Gold Council (WGC), the London-based miners’ body, cautioned policy-makers on Tuesday against curbing supplies to contain bullion demand, saying such a step might prompt buyers to shift to the illegal market.
“People buy gold as a long-term investment to protect their wealth and gold also has huge significance socially, emotionally and economically in India. Addressing this demand (situation) by curbing supply may have a short-term benefit, but this demand will be met by the unauthorised grey market and this will not be positive for either the economy or society,” WGC managing director (India) Somasundaram PR said. India is the world’s largest gold importer.
The RBI on Tuesday extended restrictions on gold imports to agencies, in addition to banks. It also said all letters of credit to be opened by nominated banks and agencies for the imports will be only on 100% cash margin basis, among others. The curbs, however, don’t apply to gold imports intended to meet requirements of exporters of gold jewellery. The government has said more steps could be in the offing to contain gold imports, which have contributed in good measures to a runaway current account deficit (CAD).
