India's "Golden Dream" Turns into a Nightmare! The Ministry of Finance's Miscalculation Leads to the Worst Gold Short Positions, With Debts Exceeding Trillions of Rupees.

In 2015, in order to reduce borrowing costs, the Indian government introduced "paper gold" bonds in the hope of reducing the interest rate of bond issuance. Unexpectedly, the price of gold soared, and this gamble ended in a miserable loss, and India became the world's worst gold bear. (Synopsis: Putin refused Trump's comprehensive ceasefire, Israeli air strikes on Gaza killed more than 400, safe-haven funds poured into gold to knock on a new high of $3040) (Background supplement: Putin agreed to cease fire Ukraine but conditionally, Trump tariffs killed U.S. stocks again, bitcoin once lost $80,000 and rebounded) The global economy under the Trump administration's tariff war and a number of policies has increased investors' worries about future inflation and economic uncertainty, but it has also pushed gold to hit new highs in March and break through the $3,000 mark. Independent metals trader Tai Wong commented last week: "Gold reached new highs after Bauer's speech, gold prices rose to all-time highs, stock and bond prices also rose, gold prices surged strongly above $3,000 and are currently in a bull market, gold prices will continue to rise due to increased uncertainty and rising inflation concerns." Gold bonds' wishful thinking failed But while global gold investors are happy, one country can't laugh. In 2015, the Indian government launched what it considered a "smart" program: issuing a gold-denominated government-guaranteed "Sovereign Gold Bond Scheme." At that time, the wishful thinking was this: Indians loved gold, and instead of letting them buy physical gold, it was better to let them buy "paper gold". These bonds are denominated in grams of gold at an annual interest rate of 2.75% (later reduced to 2.5%), which the government redeems at the current market price in rupees at maturity. Originally, the Indian government thought that in this way, it could not only meet the gold demand of the people, but also reduce the government's borrowing costs (the yield of Indian public bonds was nearly 8% at that time), and reduce gold imports and reduce the pressure on foreign exchange reserves. Indian finance officials at the time said that if the price of gold rose, although the cost of redemption increased, it would still be lower than the interest expense of general government bonds; If the price of gold falls, it is more cost-effective. More importantly, they hope to reduce gold imports and reduce the current account deficit. But the ideal is full, the reality is skinny, and this "golden dream" has now become a nightmare. After the launch of the plan, the international gold price began to soar. From $1,500 an ounce at the end of 2019, it has broken above $3,000 this month and continues to rise. The Economic Times reported that a batch of gold bonds issued in March 2017 recently matured at a redemption price of 8,600 rupees, three times the issue price! Investors are simply happy, but the Indian government's heart is bleeding. To make matters worse, the Indian public's enthusiasm for physical gold has not diminished in the slightest. India has imported an average of $37 billion a year in gold over the past decade, more than before the program was launched! In 2022, the Indian government was in a hurry and raised the import duty on gold to 15% in one go, resulting in more expensive domestic gold prices and more losses when redeeming bonds. Last year, the government hurriedly lowered the tariff to 6%, but the gold price still "rose". Source: Debt is snowballing, getting bigger and bigger At present, the Indian government has issued 67 batches of gold bonds, selling a total of 147 tons of gold, with 132 tons waiting to be redeemed. At the current gold price, this is equivalent to 1.2 trillion rupees (about NT$456 billion) of liabilities, the last tranche of bonds due in February 2032, if the gold price continues to rise, this debt burden will become huge. Market reaction and outlook In the short term, this policy mistake by the Indian government has had a subtle impact on the gold market. On the one hand, in order to reduce losses, the government may continue to adjust gold import tariffs; On the other hand, investors' confidence in gold has increased, which may further push the price of gold. In general, this "gold robbery" has taught the Indian government a profound lesson: in the financial market, there is no stable business, no matter how "smart" the plan, it is no match for the unpredictable changes in the market. As for what will happen to the price of gold in the future? And how will the Indian government clean up this money pit? Let's keep reading. Related stories Gold knocks $3,000 to a record high! Bitcoin's "risk-off narrative failure" is struggling Former Chief Executive Chen Xian: In response to anti-globalization "digital assets are guns", Bitcoin and gold can resist inflation Bitcoin 83,000 small shocks" Trump policy fog + Fed Ball problem, market hesitation 〈India's "golden dream" becomes a nightmare! The Ministry of Finance miscalculated and fell into the worst gold short, with more than trillion rupees in debt" This article was first published in BlockTempo's "Dynamic Trend - The Most Influential Blockchain News Media".