Barring govt, gold retains lustre for everyone else

Ralph Waldo Emerson once said, “The desire of gold is not for gold. It is for the means of freedom and benefit.” May be that’s why even after the government and the Reserve Bank of India have repeatedly discouraged people from buying gold, Indians continue to be obsessed with the yellow metal in various forms, right from gold bars to gold jewellery.

In fact, public sector banks sold more that a tonne of gold last fiscal, reported Business Line newspaper today . Apart from coins, bars and jewellery, other gold-linked schemes also did fairly well. Take, for instance, Bank of Maharashtra’s gold coin-linked one year deposit scheme, which saw a good response from consumers. This scheme has a monthly instalment of not less than Rs600. With this scheme customers get a Rs35 discount for a gram of gold.

The demand for gold also helped banks. If you see their annual reports, the number of gold coins as well as the weight has gone down, but since gold prices rose last year, it gave banks a good turnover value - and hence earnings. For instance, Oriental Bank’s profit from gold coins increased to Rs 2.04 crore from Rs 1.86 crore. While Bank of India saw turnover from gold sale increase to Rs 3,485 crore from Rs 2,773 crore, their earnings increased to Rs20.34 crore from Rs16.74 crore.

RBI had recently asked banks to buy on only a consignment basis, which means banks won’t be able to buy gold on credit, and this could impact banks’ gold sales numbers. Whether, India’s love for gold will eventually decrease or not, only time will tell. Read the whole Business Line story here.

Firstpost take: If you need gold for personal consumption, like a daughter’s marriage or any other reason, you have no option but to buy gold. From an investment point of view, gold can be 5 to 10 percent of your overall portfolio.