MUMBAI: On a day gold prices touched a new high, the Reserve Bank of India (RBI) urged the public against choosing gold as an asset for savings or investment. “Because interest rates are very low, people are investing in gold. But the poor should never invest in gold for whenever they have purchased gold, it either lands up in the temple or in the hands of the moneylender or, at the most, it may be given away during a daughter’s marriage,” said K C Chakrabarty, deputy governor, RBI.
Speaking at a function that marked the eighth edition of M R Pai awards, given in memory of the founder of the All India Bank Depositor’s Association, Chakrabarty said that this is one area in which the association needs to educate the general public. “Tell me, how many poor people have managed to save money by buying gold? Banks are selling gold but do they buy it back? And if they do, at what price?” he asked. The deputy governor added that the $60 billion worth of gold India imported annually was one of the main reasons behind the current account deficit.
This is the second time that the deputy governor has spoken out against investing in gold. Earlier, speaking at an event in Delhi in July, he had said that there was a need for a socio-cultural revolution to help Indians overcome their love for gold. India is the world’s largest consumer of gold and is estimated to have imported close to a thousand tonnes in 2011. Although imports have dropped following the increase in customs duty in the 2012 budget, the value of imports continues to remain high thanks to the rise in prices and the weakening rupee. Despite the import drop, domestic gold prices continue to rule high with the yellow metal being seen as a strong hedge against inflation.