Is gold losing sheen?

Jun 10 2013:--



In a flurry of announcements, the finance ministry and the Reserve Bank of India again came down on the demand for gold putting in measures to cut its import.



Accordingly, the RBI clamped down on imports of the glittering yellow metal by all other nominated agencies or star trading houses. The restrictions, which were earlier only on banks, were aimed at ensuring that gold imports are allowed only to meet the genuine demands of jewellery exporters. Then last Friday, again the RBI extended restrictions on loans against security of gold coins per customer to all co-operative banks .



But what will impact gold prices for retail customers is the finance ministry\'s decision to increase the import duty the metal to 8 per cent, which many analysts believe could lead to as much as a 10 per cent rise in prices at the retail level.



Finance minister P Chidambaram has also asked banks to discourage customers from buying gold and is hopeful that at some point in time gold will be considered just another metal, albeit one which shines a bit more brightly.



But for the Indian consumer as well as investor, gold is a complex issue mired in both age old traditions as well as new age investment philosophies. While on the one hand, the recent spike in gold demand is blamed for the burgeoning current account deficit – which is the main cause for fuelling such stringent measures by the government, traditionally gold is considered auspicious and is bought for weddings and special occasions as well as festivals such as Akshaya Tritiya and Dhanteras. Not surprisingly then, India is the world\'s largest consumer of gold.



The question then is that in view of the latest round of government measures has gold lost its sheen?


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