Yellow Metal – From Nanotechnology to Currency Buffer (Gold Reserve)
For centuries now, we are aware of the value of Gold. Gold Standards have, in fact it has taken a central place in our nomenclature and reference. It is not surprising to see that Gold has made a foray into nanotechnology – from diagnostic tools, to conserving solar power to touch screens and advanced data storage. However, to me, the most influencing impact of gold is the gold reserve, that determines the health of the local currency of that country.
Known Gold and unreported Gold
Current gold reserves for India stand at 580 tons. India is the largest consumer of Gold in the International market after China. However, it is said that, India has a maximum of yellow metal with its household, amounting to 23,000 -24,000 tons. Countries as close to that value are China and Turkey. Though US has the most amount of gold reserves, standing at 8000 plus tons, it has the least gold consumption amongst the top consumers of Gold worldwide.
If only Southeast Asian countries like India bring the Household Gold on record and to international reserve, it would probably be one of the most influencing factor in circumvent the pressure on the national currency and buffer against the intransigence of fluctuations.
How do we bring the household gold to national reserve?
Of course a change of mindset is paramount. However, more than mindset, much of the gold is from unreported earning. That makes the conversion difficult. However, let us presume, we have the owners ready to declare the Gold. That conversion to national reserve can be on similar lines as holding a piece of land. Once the household gold is considered national reserve, it will be easy to protect that part of the Gold from theft or threat. It is definitely a cultural change, no one wants to declare the amount of Gold they have, so also, no one wants to declare the amount of cash or other assets they hold. Gold can follow similar lines. We have to overcome the dilemma of declaring Gold.
Why not to expand Gold Reserve?
Expanding Gold reserve will reduce the pressure on the economy and the currency. However, the status quo may be affected because of doing so. Just imagine a currency reversal. Exporter will be significantly affected as exported products would become costly in the international market. However, imports too will be cheap. Products made abroad, ‘Foreign Made’ will flood the streets. Expat dollars flow will be reduced. All these will need a huge modeling to understand the impact. However, it would certainly equalize the value of currency (and efforts) of the common men.