Tuesday, June 26, 2012

What Gold Mean?Why Price Increases?How can Gold Price be Controlled?

Gold:

Gold a yellow reflecting Precious Metal.Gold is extracted through mining process.Gold mining is located across globe.China is the largest producer of Gold.Australia contains Largest reserve of Gold in the world.India is a largest consumer of gold in the world.Actually Gold extraction is easy but amount extracted will be very small for tonnes of ore mined.The amount of gold present in a ton of ore may vary from 1mg to 100 mg.Gold basically converted into jewellery,investment and industries.Purity of Gold basically divided based on the Karat value.24k is the purest gold without any alloy.There are different purity of gold 24k,22k18k,14,10k.

Gold Mean:

Gold is a Monetary exchange wealth of a country.Gold determines the wealth and monetary reserve of a country.The amount of gold reserve in a country determines the currency value .Gold reserve of a country varies based on the economic policy of a country.Gold is a International exchangeable commodity.Where gold can be exchanged with any country currency or commodity.Gold reserve can be considered as countries security to avoid bankrupt.Gold is a major economic security after American dollar.

Over 3000 years gold were mostly used in jewellery and Monetary.Today golds usage has largely reversed were large people use it as Investment and Industrial application.When gold has become a product of trading and investment lots of smuggling takes around the world.As price of gold shoot up everyday it has become most profitable Investment.Investors started to play gambling with gold,they create artificial demand and rise price of gold.Its has become investment,security and  loan surety.

Something To Think:Since people below 25 age in India are around 50% of the people,So for next 2 decade we need more than 500ton gold every year for  15 lakh marriages.!

Gold Price:

Gold price is determined on the demand value and exchange rate.Since gold has become trading commodity value of it vary based on demand.In International market purchase of gold are done through standard American dollar based on the demand of a nation.After purchase of gold from production nation,all transaction in Internal market are done through local currency.Smuggling gold are available at low price than actual gold market price.Gold value are also based on the stock market position of gold mining company.

Reason For Gold Price Increase:

Economy-Gold value varies based on the economic condition of a country.Economic policy has large impact on gold value in local market.When economy condition of country unstable gold price rises.
Demand-Gold is one of the rare metal in the world.So for we have extracted about 1,60,000 tonnes of gold only.The demand for gold increases everyday.Since gold are used as investment and Industry product.
Fear-Fear that economic may slip and causes damage to there life,many people started to buy gold for security of life.People's fear is the main for rise in gold market.
Dollar-Since American dollar is been used has common currency for International trading .Dollar price key for determination of local gold price.
Trading-Stock Market to play a role in determination of gold price.The market value of gold mining company are key for investment in gold extraction.
Accumulation-Some big gold business giants buy enormous amount of gold and accumulate it for creating a artificial demand.When price of gold increases they open the accumulated gold into market.
Smuggling-About worlds 2% of the gold used to fuel civil wars and underground dons.Smuggling is a global business with illegal extraction process.So this process reduce reserve and production of the gold.


Solution:

 Something to Think:Around 2030,India's gold value will touch between 25,000-30,000 ton,So if we bring that gold to reserve,How much foreign exchange we can save?

Actually currently India has largest consumer market of gold.Even though there is dip in demand for gold in India.According to a report,about 560 tonnes of gold in Reserve bank and 18,000-20,000 tonnes of gold sleep in Indian houses.Instead of Government implementing double tax on gold Import.It can reduce gold price,increase central gold reserve,provide security and development,if they follow this solution

In India gold are used for three purpose-Poor people use gold as security for loan,Middle class to show case its royalty and rich use gold as a Investment commodity.South Indian's are the largest consumer of gold.So i have some alternative to reduce import of gold without taxation.

Government has to create a policy involving Reserve Bank of India.The policy should be like this Reserve bank must come forward to receive non-used gold like gold coins,gold bar,Jewel etc from people with whom gold is sleeping without usage.In return Reserve bank has to provide them with a gold certificate and good interest rate.So that when people want gold they can return back gold certificate get there gold back with interest amount.

So enormous amount of Gold will accumulate with reserve Bank,now government must create a single window system to distribute gold required for Jewellery's.So that government alone becomes legal organization for distribution of gold to gold smith's.Since enormous gold available within the country automatically import reduces so price comes down.When government gives good interest rate even smuggling goods will come into reserve bank wallet.

Now it will easy to monitor how much gold a gold smith bought and how much he sold.So every gold smith as to pay proper Income and sales tax.Everything will be billed properly.So we can reduce black in gold market.

Something to Think:-We have already executed this solution during Chinese war.Why cant we implement now?How much it would be useful if we use sleeping gold in Indian houses?

Example:-If you have 10gm gold coin at current rate rs30,000.Now i deposit gold to reserve bank,In return they give me back gold certificate for my 10gm gold.Now reserve bank Monetary reserve position increases largely.Reserve bank will become single window for distribution of gold to gold smith.In nut shell benefits are-reduce cost,reduce import,increase our dollar reserve,increase Monetary reserve,customer gets interest and security for gold,reduce smuggling of gold,reduce black money,reduces accumulation of gold,correct income and sales tax and proper usage of sleeping gold in India          
  
If we need any other solution than this then we need to ban trading on gold,stop smuggling of gold,reduce demand,change monetary system etc.Which are next to impossible.   

Source:-World gold council,Reserve bank of India,IMF,Internet source,Newspaper,Bablu taught's 

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