Gold rush in India? Government steps in again

http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=156649&sn=Detail&pid=92730

The Indian government is at it again. Worried that the flow of savings is moving towards investment in gold, India's Finance Minister P Chidambaram has said there is a need to spread financial literacy to encourage people to invest in market instruments and not bullion.

In the first two months of 2012, gold purchases in India jumped 35%, impacting investments in other instruments like the stock market, mutual funds and property. The government has said it would prefer savings to be invested in ``more productive assets'' that would help boost the growth rate.

Chirag Mehta, fund manager at Quantum Gold Fund however notes, ``Given the current economic backdrop, where governments are struggling with problems like rising deficits and unsustainable debts, it is indeed logical for gold prices to increase in value. With policy makers continuously debasing currencies, gold will be viewed as a preferred investment, lending some solace to investors.''