GOLD IS OLD OR OLD IS GOLD

I attended the power packed 7th India Gold Policy Centre IIMA Annual Gold & Gold Markets conference 2024, as a special invitee on 15th and 16th February 2024 at Bharat Mandapam, New Delhi. 

Such was the quality of inputs from speakers, led by Shri K Rajaraman IAS, Chairman IFSCA, that I could list the following 50 points emerging out of the inaugural session, & the two succeeding panel discussions, till lunch, on day 1, which i attended.

Hence I’m penning them here, with day 2 coverage being done subsequently. 

After the worthy inauguration by Prof Bharat Bhasker, Director IIMA, the Chairman IFSCA, made  following 18 points which I strongly feel, deserve pondering & focused research by IGPC, with the help of all stakeholders:

1. India buys 40% of global gold annually & yet doesn’t call the shots. Who is responsible for decisions and dominance in gold markets?
2. India does not seem to pull the world levers, because there is no benchmark price in the country and demand is dispersed without any aggregation. How & how soon can demand be consolidated and aggregated?
3. DEA & BIS have sat together but a good delivery standard is yet to emerge for gold in India. Why can’t this be expedited in an organised manner?
4. Authentic research is required on consumer behaviour for gold purchases in India, which can serve as an excellent case material for management students ?
5. As traded volumes are picking up in the IIBX, there is an urgent need for benchmarking of gold prices. Who can do it professionally & how soon effectively, is the moot point?
6. For an 18 million strong Indian diaspora, what innovative financial products in gold can be created out of GIFT city?
7. There are taxation issues relating to GST & consequential income tax implications & hence why can’t a finance expert,  study the IIBX, traders & depositories, to evolve a workable solution?
8. Both Indian & foreign banks' participation in gold trading on IIBX needs to be enhanced & the crux of the matter is - HOW? 
9. How does India move up the value chain by enhancing its refining capacities professionally as we are touching 250 tonnes of gold dore refining? Possibilities of gold refining in GIFT city also needs exploration & research.
10. Customs Tariff policies are subject to change. What would be the ingredients of a dynamic Gold import tariff policy?
11. Refining requires land & hence why can’t land availability for expanded refining, be studied & acted upon?
12. Reforms have allowed gold loans & leasing of gold. How can this become a regular organised activity with full transparency?
13. Delivery of gold is now feasible in Kolkata, Chennai & SEEPZ Mumbai. How can this be seamlessly done for other strong demand gold centres in India ?
14. Gold is a strategic commodity with multiplier effects. Hence how we ensure respect for rule of law and study it as an important element of research in a system where unorganised trade abounds.
15. What are the improvements in the regulatory system which can be introduced to enable check on money laundering & terrorist financing associated with gold?
16. There is good news that the FATF team gave positive feedback on gold policy reforms in India, but how to inculcate the need to respect  international norms by all is a question that remains & needs to be tackled?
17. How to make exchange derivatives available in IIBX and how to dynamically introduce new reforms is a challenge that DEA faces with all the gold stakeholders?

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Mr Somasundaram, Regional CEO, India World Gold Council, was happy about the setting up of IGPC in IIMA, and had a few pertinent questions for research through IGPC: 

1. How to engage with the intellectual community & in fact, the IIMA graduates, to enter the gold market?
2. Why has gold not received researchers attention for decades & why every aspect of gold needs to be extricated from the mystery, in which it is shrouded?
3. How to handle the tax arbitrage that keeps gold outside the organised sector?
4. How to encash on - Hallmarking becoming a mandatory requirement, & hence a huge opportunity to push traders on the fence to become organised? 
5. How to propagate that tracking the source of gold is remunerative, even if it is a challenge?
6. How can usage of digital gold software of India in Thailand, be replicated in other countries?
7. Market for recycled gold is estimated at 100 tonnes. What are the key issues affecting recycling & how can countries like Russia, China, Singapore & Beijing,  who have evinced keen interest in working on gold, be roped in & we gain from their knowledge & experience?
8. How can RBI  be made more comfortable as more & more banks can be encouraged to enter IIBX?
9. Gold estimates by WGC , were about 25000 tonnes 5 years ago. What are the present figures & what is the rate of growth likely in the next 10 years, also needs statistical analysis?
10. In India gold coins alone are a medium of exchange. How can other gold products assume the same status?

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Shivanshu Mehta SVP MCX, & Director IIBX, raised 4 relevant issues: 

1. How can gold & silver be developed as an asset class so that domestic refineries enter IIBX?
2. MCX delivered 8 tonnes of gold valued at ₹ 4500 crores. How can BIS technical standards enhance the trading volumes on MCX?
3. How can the SPECIAL ECONOMIC ZONES (SEZs) be linked with jewellery exports, so that such transactions enter IIBX?
4. How can MCX effectively become the price benchmark for gold in India?  

Some other comments were: 

1.  Mr Vikas Singh CEO MMTC PAMP, enquired why banks with sizable locker presence, should not allow gold refineries in their premises, to motivate gold stock conversion into a flow?
2. He also queried why IFSCA can’t be present in banks & refineries to ensure compliances?
3. Gaurav Mehta, CEO Safe gold, was buoyant on digital gold & questioned why clear guidelines & proper regulation cannot be introduced soon, to build trust for digital gold?
4. K Mahindran, Precious metals head, Karur Vysya bank emphasised how important it is to get a fair valuation, as that is the core of gold value ?
5. Shivaram, a retail business expert opined that quietly but surely 35% of gold is being recycled by consumers through jewellers, by getting old jewellery remade, recasted or remodelled. How can this be enlarged further so that gold cycling becomes a norm & not a taboo?
6. Moderating the discussions on Gold Value Chain, Prof Sundaravalli, Chairperson IGPC underlined the need for bridging the trust deficit in gold trade as a whole. This itself is a broad research question as several players & their attitudinal differences need to be understood, before they can be narrowed down?
7. Ankur Goyal of PAMP MMTC, highlighted the milestone achieved of coins & digital gold being sold through counters, in 145 cities of India apart from online sales through Amazon, Flipkart, Ajio & their own platforms. This throws up the question of what are the steps required by governments & private players,to push ecommerce sales of gold.

He also mentioned that PAMP is licensed by Royal Mint & LBMA has accredited them for Good Delivery. How can this be replicated by other refineries in India, is another crucial point worth a careful study?

Further, PAMP made a presentation showing how it adopts 5 processes in gold refining & uses 5 techniques in its refining processes. Why can’t the other refineries reach these standards so that they are equally well recognised? Where is the catch?

1. James Jose MD Metalloys, felt that the customer is quality conscious today & hence hallmarking has risen from 300 tonnes to 1000 tonnes upto 23.5 karat. He also estimated that 1.5 lakh jewellers resort to hallmarking while an equal number don’t.

3 issues arise:

1. Why can’t hallmarking become a prestige issue with all jewellers, rather than being driven by consumer demand? 
2. How do we get a better estimate of those not adopting hallmarking, as 1.5 L appears to be on the low side?
3. How can hallmarking technologies be upgraded to raise hallmarking to 24 karat levels?? 

While government regulations to make hallmarking mandatory above 100 grams is in the offing, it needs to be clearly understood. How can this be enforced transparently, without undue harassment ?

1. Mr Sharad Chairman,  Sequel logistics felt that India being the largest jewellery market is still not understood comprehensively. Why? Movement of jewellery is unbelievable & they try to do it with full documentation. Yet they have not been able to penetrate the Bikaner polki gold output, created by 3500 artisans in a single city. Why has no-one researched the colossal potential of such centres of excellence in gold making, is it an enigma?
2. Another logistics player Atanu Sanyal of Brinks India, felt that trust is a major factor &  the gaps in the supply chain exist ,as there are no conventional guarantees in this system. What kind of guarantees can be built into this mode of operation? Especially when it comes to trust deficit between B2B sales? This was also stressed by Nirupama of Policy Consensus Centre.

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I highlighted from my book 

100 ideas to improve governance in India, 

A mighty proposition, I had suggested to our PM in 2017, of how gold stock of nearly 10000 tonnes accumulated in our 100 top places of worship can be converted into a flow, to do a complete import substitution of 700 tonnes, which costs US$ 35-40 billion at today’s prices.  

A 4 member committee headed by the Finance secretary (with RBI, SBI, CBDT & SEBI reps) can talk to all the top 100 temple trusts, to part with 6-7 tonnes of gold stock annually by each, in return for cash, gold bonds, digital gold or any other acceptable mode. Treated strictly as a donation, it will be exempt from any income tax queries. This CAN be a huge blessing, saving billions of forex, in stopping gold imports & recycling our enormous gold stock lying idle in vaults.

Secondly, I enquired & made clear that logistics & hallmarking firms can bring gold into the organised sector, only if GST is paid & consequently income tax is paid. This is the sore point where all trust disappears. Hence some painstaking attention is required to find workable solutions.

J K Dadoo, MBA IIMA 1980 

IAS 1983

Retd 2017.

Gaurav Mathur James Jose Ankur Goyal Vikas Singh World Gold Council RAJARAMAN K Sharad Jobanputra Atanu Sanyal Nirupama Soundararajan