English

By Tang Guhan

Why could gold become a risk mitigation asset for investment? What is the difference between India and China's attitudes towards the gold market?

Somasundaram PR, the managing director of the World Gold Council (WGC) India, underlined in an exclusive interview with the China Fortune Media Group that a twelve percent decrease in import volume of gold in India had been recorded in the first quarter this year. The reason was that the Indian government had introduced policies, such as the implementation of a Goods and Services Tax (GST) and other measures that further intensified the transparency of gold deals within the nation for the past two years. As a result, the gold trading market has become more orderly than before.

Somasundaram PR in an interview with China Fortune Media on Junly 25 during the China Gold Congress. (Photo by Li Lin/China Fortune Media)

Concerning the newly added three percent GST on gold, PR mentioned that despite the aggregated thirteen percent domestic tax on gold in India; taxes have had a limited influence on gold demand.

PR noted that the gold markets in both countries have a lot in common since people traditionally enjoy the appreciation of gold. The gold consumption volume in the two countries has amounted to over 50 percent of the overall global gold consumption. There was significant room for collaboration on the gold industry between two states while the competition was unavoidable.

In PR's point of view, the traits of a global currency in gold will not change in the future.

Many central banks around the world have included gold in their monetary reserves recently. Leveraged by gold's inherent risk-free advantage, it has been used as one of the most important risk mitigation tools for many countries.

PR said the economies went well if the gold price did not go up. It is the risk diversifier in our investment portfolios. The value-added trait of gold is not short-term, but it does have ample room for appreciation in the long-term, notably when served as patrimony.

Compared to other insurance products in the markets, gold could cope well with inflation while others could not  said PR, "Practices have proved that the portfolios involving gold outperformed those without it."

The WGC is now helping India to establish its first gold exchange in India. PR said India had gained their expertise from the Shanghai Gold Exchange. However, the functions of the two exchanges will differ as India imports most of its gold while China produces it. Therefore, it has control over gold pricing.