Gold-Monetization-Scheme Youtube Lecture Handouts

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Watch video lecture on YouTube: Watch on YouTube: Gold Monetization Scheme & Sovereign Gold Bond Scheme (4 Tranches) - IAS GS 2016

Gold Monetization Scheme & Sovereign Gold Bond Scheme (4 Tranches) - IAS GS 2016

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Gold Monetization Scheme & Sovereign Gold Bonds

“All that glitters is not GOLD” if kept IDLE

Global Scenario - Bullish GOLD

  • Current stock market recovery in the U.S. may be nearing its peak

  • Change in US presidency - threat to global financial stability - time to buy gold

  • When demand for dollars falls, investors park their money in gold & increase value

  • Fears of a collapse in the Eurozone, even after Greece brokered debt deal in May

  • Possible Impact of Brexit on the wider European economy

  • Market uncertainty and expansionary monetary policies

  • Concerns over negative interest rate policies by central banks in Europe and Japan

  • Demand for gold typically climbs when interest rates are low

  • Risk of collapse of large global banks and geo political risks

  • Gold mine supply peaked in 2016 but might enter decline in 2017 and 2018

Need for GMS

Need for GMS Image-1

Need for GMS Image-1

Need for GMS Image-1

Need for GMS Image-2

Need for GMS Image-2

Need for GMS Image-2

Idea behind GMS

Equation

Equation

Equation

Short Term – 1-3 Years (By individual banks)

Middle Term – 5-7 Years (By Banks on Behalf of GoI – notified by RBI)

Long Term – 12-15 Years (By Banks on Behalf of GoI – notified by RBI)

Aims and Objectives of GMS

  • Mobilize gold held by household & institutions

  • Reduce gold import and meet Current Account Deficit

  • Gold to be available as raw material on loan from the banks

  • Improve market liquidity

  • Convert gold into a performing asset

Aims and Objectives of GMS Image

Aims and Objectives of GMS Image

Aims and Objectives of GMS Image

Benefits of GMS

  • Benefit to Customers

  • Benefit to Government

  • Tax Benefits

Disadvantages of GMS

Challenges Faced by GMS

Sovereign Gold Bonds

Price of bond will be fixed in Indian Rupees based on previous week’s (Monday – Friday) simple average price for gold of 999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA). The issue price will be disseminated by RBI.

Price will be published on RBI website 2 days before scheme opens

Interest on the Bonds will be taxable as per Income-tax Act, 1961(43 of 1961). Capital gains tax treatment will be the same as that for physical gold.