Notification dated 3rd November 2009 :
The Reserve Bank of India (RBI) has concluded the purchase of 200 metric tonnes of gold from the International Monetary Fund (IMF), under the IMF’s limited gold sales programme. This was done as part of the Reserve Bank’s foreign exchange reserves management operations.
Today's News:
Rupee falls below 52 against dollar; lowest since March 2009.
As Rupee falls below 52 against dollar RBI intervention is required to save Rupee.
RBI can utilise the gold procured in 2009 to avoid purchase of gold from out side for three months and save foreign currency now. Further, as the gold was procured for a low price at that time the profit generated can be utilised for reducing the deficit.
The second option is to create a gold ETF utilising the above gold and issue it to public redeemable against their purchase of gold jewellery from jewelers. RBI can release gold to jewelers by accepting gold ETF. That also will avoid import of gold for at least three months. The advantage is RBI need not release all the gold now.
2 comments:
sir,
under RBI notification, the last two paragraphs are not there. is it your view...?
I assume it is your view.
it may not be right as gold alone is giving support to the currency. if gold is sold in the lines suggested, currency will fall.
Dear ksetrayaatraa,
The gold selling suggested is only which procured in 2009. Then it will regain the earlier position, nothing more or nothing less. It is stated that RBI is having only limited tools to control the devaluation of Rupee. That's why it was thought to save the dollar for purchase of gold.
By using ETF option gold would not be sold immediately and hence better. In Morarjee time Govt introduced gold bonds to collect gold from Indian citizens. It is similar to that idea.
Let experts in RBI and Govt decide
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