'UNDATED' CURRENCY NOTES AND GOLD - SIMPLE LOGIC HAI!
By Ruma Dubey
Sometimes the best logic comes from the simplest person at home – be it a grandmom or mother or even your domestic help. Now take the case of this rush to exchange pre-2005 currency notes. All three confer – gold prices will spike up as people to rush to clear their tijoris of all pre-2005 currency notes.
I was flabbergasted to hear this logic come from these ‘homely’, non-MBA people, especially my domestic help who is just about literate to sign her name. So I asked her, “Bai, how do you know gold prices will go up?”
Bai: Simple hai! All have cash at home. Govt has asked you to bring it all out, those without dates; best way to bring out black money.
Me: But you can go to the bank and get it exchanged for ‘dated’ notes. Why just spend?
Bai: Who in their sane mind will go to the bank with black money? When you exchange, the Govt will make a note and then they will come after you! If it’s just 10-15 thousand rupees, no one will bother but what about lakhs of rupees?
Me: But one can invest that cash in one’s PPF or maybe Post Office?
Bai: I don’t know all this; I don’t even have a bank account!
Me: So then how do you say that gold prices will rise?
Bai: Really, it is so simple and you call yourself educated! Where will all that black money go after all that PPP and Post Office you told me about? Surely buying a house and gold will be the most sought after routes.
Me: You know about realty also?
Bai: Arrey, simple hai. Go to any builder and say you have cash; he will garland and welcome you. But the entire house, aaj kal cash mein you cannot buy. And it will attract attention. So most preferred route will be gold. You walk into any gold shop and buy your jewellery with cash; say you don’t want a bill and they will take any cash!
Me: But RBI has stated that there is some Rs.7500 to 8000 crore of these ‘undated’ black money in the system. How can all go to gold?
Bai: Not all but even if 50% goes? I see in TV how everyday someone or the other is getting caught smuggling gold. Dubai ka gold and India ka gold has 20% difference in price so major smuggling has gone up. Govt also has hiked all duties but all I think people are buying more gold now through smuggled routes.
Me: So you are saying that smuggling is up and gold prices will go up also?
Bai: People will try all routes and methods till the last moment; and once deadline comes closer, all will rush to buy gold. I go to this other lady’s house to work; she is buying gold like never before.
Me: But even the jewelers will stop accepting these notes or else won’t they get caught?
Bai: I heard this lady talking over the phone while I was doing the mopping; she was saying that her jeweler now charges a commission of around 1-2% for accepting these undated notes and she is ready to pay as gold prices will only rise and she will recover her commission cost also.
Me: But what about all those stipulations by the Govt of PAN number and all for buying gold of high value?
Bai: You must be really living under a rock! Say you don’t want a bill and a jeweler will not ask anything.
Very simply put and it makes perfect sense. Experts can look at charts and fundamentals but simple logic points to the fact that gold prices are indeed poised for some run-up.
There is no denying the fact that all this money has to come out and until the Govt digitizes the entire purchase of gold completely, this is one avenue which will remain a safe haven for smugglers and black money hoarders. And with major chunk of the money expected to be with the politicians themselves, would they dare digitize the process of gold buying? That would be like axing their hen which laid the golden eggs!
Thus keep a watch on gold prices – it will be the most used medium to convert cupboard full of notes into a few boxes of jewellery.