- As always, in times of upheaval, gold has proved to be rock solid.
- Gold has become the haven of both legal and illegal cash.
- The government has begun to crack down, but it might be too late.
PM Modi's claim was that the recent currency ban was a mighty blow to forgers, terrorists and black money hoarders. The move, which was hailed as a stern, but perhaps necessary measure, has since come to the edge of spiralling into chaos. Citizens of the country are facing massive roadblocks to access their own legal tender, a highly demoralising event.
On the other hand, black money hoarders - save for the occasional high-profile dumping of gunny sacks of cash - seem largely unaffected, at least publicly.
In any case, it is ludicrous to assume that black money hoarders have most of their wealth in cash. That is only a temporary resort at best. Sure, there must be thousands with lakhs stuffed under beds, but the great fish have long since sent their cash abroad or already purchased gold or already converted the money into stocks or properties.
Black money is an old game in India though. As an Economic Times report states, back when the first demonetization happened in 1946, people had similar concerns about black money, and apparently, things have not changed in 60 years.
However more interestingly, the same report shares a letter by a reader to The Times of India in which he shared his hope that the government would now crack down on gold hoarders, investigating anyone who had more than '100 tolas' of gold.
We don't use tolas anymore, but gold in glittering in plenty of eyes even today. The instant the currency ban took effect jewellers across the country took charge and stayed open till late in the night, accepting seemingly unlimited amounts of ₹500 and ₹1000 rupee notes in exchange for the one metal that cannot be demonetized.
The rules state they must take pan card numbers for sales over ₹2 lakh. A minor matter solved by just making several bills. The price of gold has jumped ₹900 since that night and is still inching upwards. Several media reports indicated that in many places gold was being sold for over ₹40000 per ten grams, far above the current rate of around ₹31000 per ten grams, as buyers desperately seek to transform their worthless paper into some with eternal value. But this bubble only lasted as long as the cash. Prices have now retreated.
And it is not just the 'black money hoarders' either. Millions of honest citizens seem to have decided that their faith in paper currency has been permanently damaged, flooding into gold shops.
This has not escaped the notice of the government, who seemed to have planned for this. Some 600 jewellery sellers, across 25 cities, have been asked to submit details of their sales. And the PM has begun ominous mentions of how gold would be on the radar next.
Gold sellers are indeed listening. Gold sales had reportedly come to a halt when the transaction was cash. They are demanding credit and debit cards or cheques. There are rumours that all citizens will be asked to get an evaluation of their gold and submit details to the government.
Whether this draconian measure will be implemented is, as of now, unknown.
In the end, all of this is unsurprising. India's passionate love affair with gold extends across the centuries. And the current upheaval over liquid cash seems to have only reaffirmed what most households believe anyway - in India, gold is the only real wealth.
Last Updated 31, Mar 2018, 6:47 PM IST