With Gold becoming a hot commodity to invest in, the Bombay Bullion Association (BBA) has also gained prominence along with the yellow metal. Established in 1948, BBA has become a nodal point for information on gold as it maintains the records of gold and Silver imported and stocks of bullion held in the country. It releases the rates of gold and silver prevailing in Mumbai for the benefit of trade and public in general which is also a benchmark by the Central and state governments.

Suresh Hundia, president of the BBA, in an exclusive interview with Commodity Market Associate Editor Anil Patil, says gold is in every Indian’s blood.

What should an average investor do when the gold market is so volatile?
• At this rate investors should keep out. The market is expected to reverse. When gold comes down to $712, one can go back and buy.

What is the reason for this fluctuation? Does it have anything to do with stock markets?
• You see share market is going up because India’s economy is strong. So Sensex is rising and people have earning power and money to invest in market. As far as gold market is concerned, India has got nothing to do with it. It is an international market.
World’s biggest buyer is India and we have to depend on other countries for gold. We don’t have any gold mine worth its name in India. New York and London decide gold prices and after the fall of interest rates in America, the prices of gold have increased. There are many other reasons too for the rise in gold prices, crude, euro, Yen and international demand.

Is it good for a developing nation like India to import a lot of gold? After all, how does it help the economy, as it is only a metal and not food grain?
• (Laughs) It is not like that. India was ‘sone ki chidiya’ (golden bird). There is a craze among ladies for gold. They always feel it will help them in bad times. If you see share market or property market their prices can crash and reduce to rubbles but gold is something you can encash in the middle of night. In last 10 years if you see it is on constant rise.

But Indians have a tendency to keep gold for generations and it passes from one generation of women to another generation. Don’t you think it is a dead investment and is not productive?
•It is true. It is a dead investment. But this is the history of India for the last 5,000 years. Gold is in the blood of Indian women for centuries. Just like fish cannot live without water, Indian women cannot live without gold.

Why this metal has always been in demand in the history of world vis-à-vis other metals?
•It is such a metal that will never die. If you break gold in pieces and bury in the ground it will never lose its shine. It will never rust compared to any other metal. So it will always be in demand in future. Today, the kind of gold of the Government of India has is equivalent to the entire American public having it. And as much American banks have gold in their stocks Indian public has more gold than them. This is Indian psyche for generations and it will never change.

There was a time when gold was standard currency and only in early 70s we converted dollar into international currency. Today, dollar is depreciating worldwide so what does it mean for the role of gold in future economy?
•When dollar falls gold will gain. It will play an important role in future.

Is there any solution from your side to curb the global volatility in the international market?
•In future it will be little up. Today bottom is $752 and as Diwali nears, the prices of gold will fall. I feel this year India will import a lot of gold even if prices go up because rupee has become stronger and that will not make much difference to import.

What is BBA’s role as a body and how does it stands for Indian consumers’ benefit?
•We say gold is always a safe investment. If today you have, Rs 1 crore then put Rs 5 lakh in gold. You will always grow in your fund.

What is gold industry’s biggest problem today?
•The biggest problem is that today India is the biggest buyer of Gold but there is no respect for Indian market in international gold market. There is no rate of India that reflects on the screen. You will see rates of New York and London but never see India’s rate for gold in international market. This is the weakness of Indian government. We have to make gold duty-free and give permission for re-export. Just like there is no tax in share market then gold market should be tax-free. They should convert it into a share market. I feel things will change for good.

Why there is no respect for Indian market? It is surprising.
•Here you have to pay duties. There is stamp duty, octroi charges and sales tax. We don’t have re-export permission too. So there are many such problems.

But as a lobby don’t you put pressure on the government?
•We are pressurising and it is improving but things will take time. Today, ordinary man cannot even import gold and only few export houses have permission to import gold.

What is the impact of Gold Exchange Traded Funds?
•You see there are three ETFs at present in India and Reliance is the fourth party that is coming. One gram is one unit and one unit will not buy this paper gold. They want this gold actually in their hand. Now, if you take 1,000 units for 1 kilo then to keep that 1,000 unit you will have to pay maintenance of Rs 10,000 so people are not willing to pay that money.

Indians are known to hide their gold. They will dig earth and hide their gold rather than buying this paper gold and paying money. That is the reason ETFs are running slow compared to foreign countries. It will grow but it will take time. Today there are only 3.5 tonnes of gold in ETFs and the way Indian economy is growing ETFs should grow more. People are also not aware of ETFs much.

Don’t you think ETF is much safer compared to keeping gold at home?
•There is also lot of formalities. There is demat and a lot of bureaucratic hurdles. Also, to take delivery you have to run ten times. I feel if the government starts giving interest on ETFs then it will grow. Today, you are charged money to maintain your ETF account and in early days you used to get interest for keeping your gold in the bank.

Why it is growing in western countries compared to India? And what is the industrial use of gold? Is it on the rise?
•In western countries people are educated and they don’t want to keep gold at home. Here women want to keep gold physically rather than keeping some paper at home. (Laughs) Even if their husbands fall in bad times, they will not give them gold. As far as industrial use is concerned, it is close to 5-7 tonnes which is increasing slowly but at 5 per cent rate. Mostly, it goes into jewellery.

Are gold reserves good for a country that is struggling for food grain reserves?
•I feel India must have more gold in the country. But I want Government of India to hunt for mines for gold. We are spending our dollars in importing gold and I feel we should spend some money in finding gold in our own country. We should find new mines. If we try we will find gold. We are interested in finding gas then why can’t we find gold too? I have heard that there have been places like Bangalore, Nagpur and some places in Rajasthan where some gold deposits have been found but the work is going slow. We should work fast on such mines.

Can’t your association do something then?
•We don’t have power and authority to do something on this front. Our job is only to increase business and how to do business and not finding mines.

What will be the consumption of gold in India in coming years?
•Last year we heard the figure was 682 tonnes and this year the way Indian rupee is going, I feel the demand would be 20 per cent more. If the rate of gold does not increase further then I feel 800 tonnes would be the target till 2008. There will be then a constant 10 per cent growth. I therefore say as soon as gold dips buy and sell as soon as it rises.

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