“The Reserve Bank of India bought 200 tonnes of gold for $1,045 an ounce from the IMF four years ago. The Government can swap it for US dollars,” said Gornall, who is here for the India International Gold Convention 2013. Earlier, in his inaugural address, Gornall said the RBI can organise the gold-dollar swap without divesting its holding or incurring any further interest charge to access $23 billion According to RBI sources, the gold that India bought never came into the country as the transaction was only a book entry. The gold was purchased for $6.7 billion, in cash. Asked about this, Finance Ministry officials said the RBI will have to take a call on swapping the gold for dollars. . “By swapping gold for a payable currency, you can benefit by having access to the dollar for a period of your choice, while remaining a long-term holder of gold as the swap is a transfer of asset over a period. You will have bullion bank counter-party risk but this is successfully managed at the RBI which has strictest lending criteria of any central bank in the world.” Making it clear that he is not advocating sale but only swap of gold, Gornall said in this case gold and the dollar will provide collateral for each other. Pointing out that gold had in the past climbed above $1,900 an ounce and crude oil over $100 a barrel, he wondered how the current account deficit was not as bad then as it is today. “India has always had a deficit, a structural deficit, so what’s different today?”
Posted on: Sat, 17 Aug 2013 20:28:59 +0000
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