Will the gold monetization scheme help me if I don’t want to melt my gold?

Short Answer: No.

Long Answer:

I wrote about the gold monetization scheme last week, and a common question on that (presumably from people who haven’t read the post) is what if I don’t want to melt my gold?

If you don’t want to melt the gold then this scheme is not for you. The most important requirement of the scheme is that they should be able to melt your gold, and keep it with them so that they can use it for their lending purposes. The gold is of no use to anyone if it can’t be lent out, and it certainly can’t be lent out in the form of grandma’s bangles.

A semi related question then is if you have to melt the gold then how different is this from just selling your jewelry to your family jeweler and then investing that money in a gold ETF. You can avoid all of the hassles that comes from having to visit the hallmarking bureau, getting your gold melted, opening a bank account etc.

Gold Bar with Reflected Coins
Gold needs to be melted under the Gold Monetization Scheme

I think this is an interesting question, and one that is answered by looking at gold in two different ways — one for investment, and one for personal consumption.

If you buy jewelry then that’s gold for your consumption and use, and you wouldn’t normally think about selling it and to that extent the gold monetizations scheme is not going to magically put that money to work, and you gain nothing out of the family jewelry you’ve got.

However, a lot of people do buy gold on Dhanteras, other festivals, or just generally accumulate it as part of their investment strategy, and this scheme is certainly very useful to those people in those specific cases.

If you plan to buy gold through a gold ETF or a gold mutual fund then this can prove to be an interesting alternative to that because the tax angle on this is very favorable, and not only do you benefit from gold appreciation you benefit from interest as well.

Gold ETFs are a part of most investor’s portfolio, and the gold monetization scheme may potentially create a good competitor to that in terms of an electronic gold investment option which can be converted into physical gold at your demand, which is something the gold funds can’t do at the moment.

3 thoughts on “Will the gold monetization scheme help me if I don’t want to melt my gold?”

  1. Will GMS benefit me w.r.t my family gold jewellery assets as they are of no use to me practically?? And what is the reliability or risk benefits ratio of the scheme??

  2. If I want to buy gold as investment and benefited by the gold monetization policy, is it possible to buy there certificates directly?

    1. Not as part of this scheme because for this scheme it is necessary that you take your gold to them and have that melted. You can buy gold as investment by buying gold bars through jewelers or gold ETFs on the stock market.

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