How Investors In Gold Are Impacted By Union Budget 2015-16

Investment

oi-Sunil

By Sunil Fernandes

Published: Saturday, February 28, 2015, 14:50 [IST]

If you are an investor who has a penchant for investing in gold, Finance Minister, Arun Jaitley has tried to wean you way from the love for physical gold in Union Budget 2015-16.

First, he has announced a sovereign gold bond, with an interest rate. Probably this bond would track gold prices, so it would give you an appreciation. It would also have an interest rate, which means you could get appreciation as well as a fixed interest rate.

What would be the interest rate on the instrument is not yet known. But, it would be ambitious to expect an interest rate more than that of banks. In fact, it could be much lower.

Now for those who love physical gold, the government would tap into the potential of having gold coins with the Ashoka Chakra on it. The one reason for the same would be to avoid importing gold coins. The problem with importing gold coins is that it puts pressure on imports, which in turn has an effect on the trade deficit and hence the current account deficit

In the past the government has tried to come up with several ideas, but, to be honest the above plan of the government looks more commendable then all of the previous ones.

There were reports that one might see a cut in import duty on gold, which could benefit the consumer. But, that did not happen in the Union Budget and gold did not get any cheaper. The government probably wanted to take all precaution with regards easing restrictions on gold imports and putting pressure on the current account deficit and the rupee.

All in all the Union Budget 2015-16 has come-up with some very novel ideas when it comes to gold. We only hope that it us successful and keen investors use the sovereign gold bond to invest in the precious metal.

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