Characteristics of gold
Gold is a chemical element with the symbol of Au and atomic number 79. Au is derived from the Latin word aurum, which to mean is “shining dawn”. It is a dense, soft, malleable and ductile metal with a bright yellow lustre. It is malleable of all metals in that, one gram can be beaten into a sheet of a square meter or an ounce into 300 sq.ft. Gold leaf can be beaten thin enough to become transparent.
Light transmitted through such leaf appears greenish blue. It readily forms alloys with other metals. It is not easily corroded. This metal occurs often in free elemental (native) form, as nuggets or grains in rock, in veins and in alluvial deposits. Less commonly, it occurs in minerals as gold compounds, usually with tellurium. It is a valuable and most sought after precious metal.
Its use
Gold had been used from time immemorial as jewellery and as coinage. It led to the gold standard as an international currency, but it has been given up by most countries after First World War and the remaining countries including U.S. after Second World War. It has the advantage of being a liquid asset, which could be cashed any time, any where. It is a medium of exchange, a universal currency. It offers insurance and protection to the holder.
Possession is ownership. It is a collateral for loan all over the world as is evident from the number of pawnbrokers with banks joining as institutions lending against gold.
Gold has been used in India even as medicine and it has been considered to be beneficial for health. It is stated, that it can be used in nuclear medicine for treatment of cancer and for other illnesses.
Gold salts have been used in indigenous medicine and gold alloys used in restorative dentistry. Gold offers significant employment in jewellery trade and has promoted the skill of Indian goldsmiths from time immemorial known even in Rome at the height of its civilization. Egyptians worshipped the Golden Calf. Temples in India have golden roofs.
Where do the stock of gold lie?
The total stock of gold in the world is 18,000 to 20,000 crores tonnes. The largest stock of gold is officially held in the U.S. and Russia, while still larger stocks are held in India and China more amongst its people than in the custody of the Government. Notwithstanding such heavy stock, every additional gold production and imports from other countries are according to the latest statistics consumed by India to the extent of 35 per cent and China 40 per cent. Whenever the gold import is restricted, smuggling takes over, as it is most convenient for smuggling, because it occupies less space combined with heavy value. India and China convert part of the imported raw gold into jewellery and export them. Even so, net addition to its holding each year is significant.
Lure of gold
Gold all over is used as a symbol for purity and is a sign of wealth and prestige. In Utopia, a classic from Thomas More, describes in one imaginary island, gold is so abundant that it is used to make chains for slaves, tableware and lavatory seats. When ambassadors from other countries arrive, dressed in ostentatious gold jewels and badges, the Utopians mistake them for menial servants, paying homage instead to the most modestly dressed of their party. Bible describes New Jerusalem city as paved with gold.
Story of Midas indicates the value of the metal in the minds of the people. Gold has always been ridiculed by persons, who have contempt for ostensible wealth, but there is a craze for gold all over and more so in the East. Because of its value, the swindlers and fraudsters have always made money out of the gullible by offer of conversion of base metal to gold.
Economics of gold
Economists have been believing, that India by importing gold and diverting active earnings to idle assets, has been a loser. It is for this reason, when Mr. Morarji Desai was the Finance Minister, he tried to popularise 14 ct. gold (as against 22 ct. mostly in use of the 24 ct. gold). It was a failure. Many attempts have been made to divert the attention of the public from gold. But there has been obstinate resistance to them.
Average saving rate in India is 35 per cent, which should be most welcome for development. But unfortunately 56% of the saving are physical savings with cash savings in fixed deposits, insurance and provident fund and other pension scheme adding upto to 44 per cent. The physical savings are mostly in the form of gold, silver and other precious metals including stainless steel, apart from semi-durables like fridge, geysers and air conditioners.
Much needed infrastructure is possible only out of cash savings totally inadequate for further development, so that India has to depend on foreign investment, which should not have otherwise been necessary.
All the same, stock of gold gives India economic strength and could be a valuable fortress, if they could be mobilised for better use. The growing adverse balance of trade due to our import of both fuel and edible oil with exports not balancing the imports, India has been having a continuous current account deficit, which has been draining our wealth and causing alarm. The solution should lie in curbing the import of luxuries and fuel oil.
Substitution of import of fuel oil with oil resources, which India has in plenty, besides by solar, biomass and other sources of renewable energy should be the effort, besides augmenting exports. But the Government has decided to curb import of gold. It can hardly be a solution, because the import will continue through unofficial sources by way of smuggling. It is, therefore, hardly a solution.
A rational gold policy is vital
Considering the attachment people have for gold and large stock, which India has of gold, a gold policy which will take advantage of the faith of the people in gold will be more relevant than the present short-sighted policy of curbing imports. The better promotion is to promote gold bonds and create faith of people in such bonds.
Though they will be paper gold, which would entitle them to return of gold at any time of their choice, they will give them ownership of gold, protect them from theft and being exposed to risk to life. The existing stock of gold in individual hands, if made available to the banks and the Government, will play a significant role in our development.
No comments:
Post a Comment