China Pushes for Gold; India Follows Suit

Source:

"India's Central bank considers a proposal for banks to trade in gold."

Hot on the heels of moves in China to expand the gold market in the country, several Indian bans have submitted a proposal to the Reserve Bank of India (RBI), India's central bank, to permit them to trade in gold in the domestic market and to hedge their requirements.

These banks hope to take advantage of the current bout of bargain-hunting taking place in the country as investors take advantage of lower prices.

At present, banks are only allowed to buy gold. India's central bank has permitted certain banks to import bullion on consignment basis for domestic jewellers and exporters but they do not stock gold. And, while a couple of the nominated banks authorised to import gold, sell gold coins at a premium of 10% to 15% over the market rate but, they are not permitted to buy back the gold they sell. Among their proposals, Indian banks have asked for permission to invest in gold exchange traded funds.

Incidentally, banks and agencies such as the MMTC (Mines and Metals Trading Corporation) account for nearly 80% of the country's gold imports.

According to reports, China's central bank is also ruminating over allowing second-tier institutions such as the Minsheng Banking Corp and China Merchants Bank to team up with four major state banks, including Bank of China, to hedge bullion positions in the overseas markets.

"If banks are allowed to trade in gold, the move will only strengthen the validity of the bull case in gold,'' said the head of global markets at IndusInd Bank, another bank permitted by the Reserve Bank of India to import gold.

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