What is Gold Monetization Scheme?

As a smart investor you need to explore all the possibilities for investing your money into something new.

In this article we wrote how you can take advantage of Gold Monetization Scheme in India and earn some extra interest.

We talk about everything about the gold monetization scheme that you might like to know. So just read it.

Let us begin with gold monetization scheme in India.

The new gold monetization scheme was launched in the month of May this year.

The sole purpose for launching this scheme is to reduce our gold imports significantly which is around $30+ billion.

New Gold monetization scheme would help to mobilize gold held by domestic households and other institutions mainly temples.

In India there is over $800 billion worth of gold held by domestic households and temples. The exact quantity of the gold held by them is over 20,000 tons.

The gold would be collected through this scheme and made available to manufacturers to produce new jewelry and other items.

Now if you are new to Gold monetization scheme then you need to know that it is not the first time that a government of this country has launched this particular scheme.

The earlier gold monetization scheme was launched in the year 1999 and it failed that time.

The reasons for the failure are many.

First of them would be lack of awareness. Lay man was less aware of this particular scheme.

Second reason for the failure is eligibility criteria. The minimum amount of gold that you would have to deposit was 500 grams that is ½ Kg. Now how many people in India have this much amount of gold to deposit.

Only rich people and temples could have deposited. So it failed.

The third reason is very low interest rate. The Interest rate that government was willing to pay was just 1 percent.

So high deposit quantity and minimum interest made this scheme fail last time.

In the year 1999 government was able to collect only 20 tons of gold out of 20,000 tons. So the scheme was a complete a failure.

In 1999 this scheme might have failed but this time things are different.

The government is smart enough to learn from mistakes made in the past.

So they have come out with new minimum deposit quantity and the interest rate.

In new scheme the minimum deposit is 30 grams as opposed to 500 grams in 1999. So more and more people could deposit and join this scheme.

Secondly the interest rate that you get this time is 2.5% as compared to only 1% last time. So you have 250% increment there.

Both factors can be a game changer.

Finally the level of awareness has also increased because of internet.

Now we need to debate seriously that is it going to succeed this time. The reason is a serious investor who is ready to deposit gold might not invest if he finds scheme is not going to succeed.

UBS Securities conducted a survey of over 1452 people on the internet. And they found out over 50% of respondents are likely to deposit their gold under current gold monetization scheme.

However if the scheme has to be successful then the government has to build necessary infrastructure to collect gold.

Moreover the scheme could be successful because in rural areas there is a huge demand of gold.

In last paragraph you got the Idea about the gold monetization program.

We discussed what the scheme is, how it is different this time and whether it is really going to succeed this time.

Now in this paragraph we talk about how an investor can make use of this particular scheme.

#Fact 1: The sovereign gold bond will allow investors to buy gold certificates from the government and later investors could redeem it for cash or physical gold, as they like.

#Fact 2: Government would decide the rate of interest at which the gold bonds will be issued. The rate of interest would be calculated on the basis of the value of gold which was deposited by the investor at time of investment.

#Fact 3: The gold bonds might be issued in four denominations. And they are in the form of 5 gm, 10 gm, 50 gm, and 100 gm. 500 grams per person is the cap that has been put for a year.

#Fact 4: Government has ensured that it will be protecting its investors from at least medium term volatility, if not long term. Hence the duration period of gold bonds set by the government is minimum of 5 to 7 years.

#Fact 5: This scheme will help the country reducing the demand of physical gold bars and coins. Around 300 tons of gold per annum could be invested into gold bonds by the government.

#Fact 6: Previous gold monetization scheme allowed mobilization of only 20 tons of gold out of household. However, this time under new rules government is expecting to mobilize 10 times more.

#Fact 7: The gold monetization scheme would allow investors to earn an interest on their gold account. The minimum depositing quantity is 30 grams, as said earlier.

#Fact 8: The country will save a lot of money as it will cut down our gold imports which stand around 930 tons worth $34.42 billion. It will also reduce the foreign exchange outflow.

#Fact 9: With this scheme India would make use of at least 20,000 tons of gold stocked in households and temples. They are not traded or monetized so current scheme will collect gold and government would make available to manufactures in the country.

#Fact 10: Finally I would say this scheme is going to stay here so feel free to invest your gold this time. The interest rate is at least 2.5% and the minimum deposit is 30 grams only.