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Highlights of India International

Gold Convention 2018- Part-2

 

Below is the second part of the highlights of India International Gold Convention 2018 held between 3 and 4 August, 2018 in Kochi. For complete presentations and videos of the conference, please visit www.goldconvention.in

 

Mr. John Reade, Chief Market Strategist, World Gold Council on Gold market in the next five years

“Economies will grow, especially in emerging markets and as a result GDP per capita will continue to rise across the world. Likewise, middle class proportion will rise. Increased wealth and increased middle class will drive gold demand, although their tastes will have changed.

In line with the increase in demand, new markets could open up and infrastructure for gold market can change. Shanghai Gold Exchange is a fine example of new market of the last decade. LME Precious which is launched recently is changing the market now. Likewise, India Spot Gold Exchange, which is under development could redefine the market here in India. Shar’iah Gold standards have been set to attract new class of investor into gold.

Technology could disrupt the markets. The gold-fintech landscape is evolving quickly. While at this point in time, there is no “Killer Apps” visible yet, technology may become the catalyst for change in the gold market.  Finally, taxes and regulations will also play a role in the global gold markets.”

Prof. Arvind Sahay, Head, India Gold Policy Centre, on Mapping gold policy from present to future

“In IGPC’s opinion, the four broad goals set out by the government for the gold sector seems to be financialization, gold as an asset class, minimize CAD issues and make gold more inclusive and add value to the economy.

The five pillars. we believe that are essential to achieving these goals are gold spot exchange, gold monetization scheme and the related gold metal loan and the gold saving accounts, India good delivery standards which is closely linked to the success of both spot exchange and GMS, Refining, jewellery making, trade and exports that would add value through employment and exports and finally, the central role of banks in tying all the players together. Critical to the entire reform process in gold is the role of banks, the key integrator of all players. Policy framework should make gold a viable business preposition for banks. There is a lot of inter-dependency between each of the pillars and therefore any change in policy pertaining to one would necessitate a look at its impact on other pillars. We hope to see the policy get into implementation in three to six month’s time.”

 

Discussion: Financialisation of Gold

Mr. George Alexander Muthoot, Muthoot Group

“About five percent of the pledged gold is actually abandoned and goes for auctions. So, probably, gold which goes for auction can be melted and given to the government. Then it can come back to the system and reduce imports to that extent.

“Ornament has a lot of emotional appeal. So, retaining ornament as ornament, can we develop a GMS? That is, you collect the ornament, and at the end of the period, give back the ornament. That kind of scheme would be hugely successful.”

Mr SudheeshNambiath, India Gold Policy Centre

GMS is not picking up because of inadequate incentive structure, be it for the customer who wants to deposit or for the CPTC or for the bank or for the refiner. A customer wanting to deposit is not sure how the tax authorities are going to treat the gold that has been deposited. Banks have better control when it comes to importing gold and leasing gold into the market.

So we need to rework on the complete incentive structure from the customer till the bank.

Mr Shekhar Bhandari, Kotak Bank:

“Given the elaborate process involved, on a conservative basis, the cost of operating a GMS would be at least 4.5%, excluding the transportation costs, counter-party risks etc. So, in order to make it viable for banks, couple of options could be explored. One option is a 3% subsidy to bank operating GMS. Second could be permitting it to be used as a part of CRR, where at present banks are supposed to keep 4% of their demand and time liability as CRR requirements.”

“Sovereign Gold Bond is a good product in terms of its reach although it has collected only about 5000 crores. It’s a good beginning. Lot more needs to be done. The gold price risks need to be hedged at some point.”

 

Mr Jayant Pawania, Yes Bank

“I agree with Shekhar on the cost of operating GMS. Beyond that, GMS has many unknown risks such as risk of future changes in customs duty structure, etc. Also, there is a confusion on whether GMS is loan product or an outright product as the current scheme provides for both”

Mr. Amar Singh, J P Morgan

“The most fundamental requirement, in my opinion, is bullion banking. Without a strong bullion banking infrastructure, scheme such as GMS may not succeed. Second, permit banks to hedge their exposure. This would help banks to manage risks. Third, permit banks to launch innovative paper products. Together, these can make schemes like GMS successful and also contain physical gold imports for investment purposes.”

Mr. Albert Cheng, Singapore Bullion Market Association

Niti Aayog report is quite ambitious and exhaustive. In my opinion, gold saving account is the most powerful product that India must consider immediately. It’s a plain vanilla product offered by banks to customers to park their money in gold, help them buy and sell gold etc. Slowly, banks can build other services around it.

Mr. Ashwini Kapoor, MMTC Limited

“Linking of Jan Dhan Yojana account with Gold Saving Account can increase the reach of gold saving account to every nook and corner of the country. Through awareness, such accounts can be used to mobilise gold from public. It would be a win-win for customer as well as the economy.”

“On India Gold Coin, we at MMTC along with our partner IGC are trying to increase the reach by placing these coins in post office in addition to the current network of seven banks. Besides, we have tied up with Electronics Niketan, a digital platform of government of India to reach out to 106 districts.”

Mr. Gorankhnath Yadav, India Government Mint:

“In my opinion, couple of points need to be highlighted in the marketing campaign of India Gold Coins. One is the positive tolerance on weight and purity. While the stated purity is 999, the actual purity of these coins is between 9995 and 9997. Likewise, in the weight also, there is a positive tolerance of between 2 milligram to 10 milligram. These have to be highlighted. Second, embossing these coins with the image of any god or goddess could increase their popularity. Third, mentioning the name of the manufacturer, as India Government Mint, would also increase its appeal”.

Mr. MrugankParanjape, MCX

IGC coins should be made available through well-known online platforms as well to make it convenient for new age customers. Banks would continue to play a key role in financialization of gold, if permitted to offer bullion banking services.

Discussion on Skill Development and Domestic Council

Mr Ankur Goyal, MMTC PAMP and Ms. Sheela, WGC

Precious metals training institute is a skilling initiative for the industry. Its a joint venture, not for profit company, industry driven body. Main idea is to provide training and certification in the field of assaying, which is for testing of gold and jewellery, also for standarisation of process and further create learning opportunities for people to acquire various analytical skills. MMTC Pamp& WGC are main sponsors of the initiative with BIS and NABL as main observers guiding us in this endeavor, followed by the industry partners IBJA, GJEPC, BFI, GJC, IAHC and association of gold refiners & mints. We have taken help from IIT Bombay and Pune to give us whole design of course material, that is, for theory and practical. This is the first center which will be coming up at Indian institute of Gems & Jewellery, Mumbai, which is affiliated with GJEPC. We are in the process of getting all the equipment and utilities. Faculty is already been on our roles and our target is to start the institute by October 1, 2018.

Mrs Meenakshi, Bureau of Indian Standards (BIS)

As far as the report concerned on cadmium imports to India has doubled in last couple of years, It’s still used in Silver. Based on the test results over past 20 years of our Chennai regional assaying center in the referral laboratory, I can strongly vouch the cadmium level in Gold has drastically come down & close to nil.

We, as of now, certified 20 refineries as per IS 1417 & 1418. 995 & 999 are the two fineness which are certifying, One of the 20 certified by BIS is LBMA certified refinery. Coming to the term called “Good Delivery Standard”, our guideline is silent about it; We look more on technical aspect since technical requirements rather than a system-oriented approach as in LBMA. Technically, LBMA also follows IS 1417 and 1418.

“Regarding UID on jewellery, it is in the final stage of implementation, some trials have already been run under CGR metalloys and one in Ahmedabad. Once it’s done, everything will become online. Then the hallmarking jewellers registration will become online and assay, UID, certificate of conformity will all become online.

With regard to mandatory certification, it is a major task, as per the report which I have got from our headquarters. The industry wants the certificate of registration for jewellers, to be simpler. BIS is now ready and well equipped to handle certificate of registration online, Given the number of jewellers eg.Upto 10 lacs, with reference to assay centers, we have a wide spread assay centres all over India and only 15% of their capacity is utilized now, The existing assay centres will be able to handle the volume of gold jewellery submitted for hallmarking. This is with regards to jewelers& assay centers.

BIS Act 2016 has been gazetted, the Hallmarking Regulation 2018 has gazetted  and implemented. So now, enabling clause has already come into place, legal aspect is now complete as far as hallmarking is concerned. So this has paved way for making it mandatory if the government decides. Central government in consultation with BIS may make it compulsory, so it is up to the government. As far as BIS, we have submitted our level of preparedness only for ensuring the conformity of the gold jewellery across India.  We may not be fully capable of visiting each and every shop and verifying whether they are selling the correct fineness. So that may have to be given to state government for implementation because we don’t have enough manpower to handle  three lakh jewellers,  So this infrastructure is lacking. Implementation will be in phases, Earlier suggestion was it will be first introduced in metropolitien cities, but now central government will only make the announcement and will give two months for opinion. Then we have to notify to the WTO, which also gives two months and industry will be given one year time to phase out the jewellery which is not hallmarked. So by within one to one and a half years adequate amount of assay centers will be developed, if there is a need.

Mr. Ankur Goel, MMTC PAMP

I agree with Mrs. Meenakshi. While technical standards followed are same, LBMA standards also prescribe the limit for the balance impurities.

Mr. Surendra Mehta, India Bullion and Jewellers Association (IBJA):

When the commerce ministry proposed a domestic council, we suggested that it should be a “association of association” or “Federation of association” representing the entire spectrum from mines to market.

 

Disclaimer: Views are personal and not the views of the publisher.