The World Gold Council (WGC) is a nonprofit association of the world’s leading gold producers. The World Gold Council Report has been in the news recently, hence it forms an important part of the UPSC current affairs section.
World Gold Council – WGC Why in the News?
According to the latest World Gold Council Report titled ‘Gold refining and recycling’, India has ranked 4th in global gold recycling in 2021. India recycled 75 tonnes of gold or you can say 6.5% of the total gold recycled across the world.
This article will give further details about the World Gold Council and the report released by WGC within the context of the IAS Exam as it has a very high chance to be asked for prelims exams as well as under General Studies Paper 3 and International affairs.
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World Gold Council Report – 2022
- According to the World Gold Council Report, China holds the first position in global gold recycling in 2021 as it recycled 168 tonnes of gold. China is immediately followed by Italy and the United States of America at 2nd and 3rd position with 80 tonnes and 78 tonnes of gold recycling respectively, in 2021.
- As per the estimates of the World Gold Council Report, between 2013 and 2021 the gold refining capacity of India is increased from 1500 tonnes to 1800 tonnes.
- The report of WGC suggests that the increasing price and the demand for Gold is mainly due to the Ukraine invasion and the surging inflation.
Role of Gold Recycling
- Around 11% of India’s gold supply has come from the ‘old gold’ in the past 5 years.
- Gold recycling in India is driven by the changes in the gold prices, expectation of future gold prices and wider economic outlook.
Refining Industry in India
- India recycles only a small amount of its own stock of gold. On an average India accounts for around 8% of global scrap supply.
- The informal sector in India accounts for as much as an additional 300 tonnes to 500 tonnes.
- Refining profitability, particularly among the small players, is positively affected because of the introduction of Goods and services Taxes, impact of COVID-19 pandemic and other macro economic factors.
- The industry is also witnessing enhanced growth due to the custom duty levied on Gold.
- India’s Gold refining landscape has witnessed a significant shift over the past years due to a push towards organized recycling. The formal operations have increased from not even five in 2013 to 33 in 2021.
- This has led to a surge in India’s organized gold refining capacity to an estimate of 1800 tonnes compared to 300 tonnes in 2013.
- The majority of these refiners have annual capacity of less than 50 tonnes
- The dore shipment has witnessed a rise from 50 tonnes in 2013 to 276 tinnes in 2018.
- The import fell to 159 tonnes in 2020 due to the coronavirus pandemic but then rose to 220 tonnes in 2021. Which in turn has increased the share of overall import of gold dore’s from 7% in 2013 to 22% in 2021.
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Link Between Gold & Economy
- Gold as a Currency: Gold was used as the world reserve currency up through most of the 20th century. The United States used the gold standard until 1971.
- The paper money had to be backed up by an equal amount of gold in their reserves.
- Although the gold standard has been discontinued, some economists feel that we should return to it due to the volatility of the U.S. dollar and other currencies.
- Gold as a hedge against inflation: The demand for gold increases during inflationary times due to its inherent value and limited supply. As it cannot be diluted, gold is able to retain value much better than other forms of currency.
- Gold is the strength of Currency: When a country imports more than it exports, the value of its currency will decline. On the other hand, the value of its currency will increase when a country is a net exporter. Thus, a country that exports gold or has access to gold reserves will see an increase in the strength of its currency when gold prices increase, since this increases the value of the country’s total exports.
- Since, the central banks rely on printing more money to buy gold, they create an excess supply of the currency. This increases the supply and thereby reduces the value of the currency used to purchase it.
Way Forward
- Gold recycling in India is driven by the trends in prevailing economic conditions and the local rupee gold price.
- The economy of India is expected to witness the rising trend in future which means the higher income at hand will reduce the outright selling of gold by the consumer as the need for distress selling will be reduced.
- Expansion and promotion of the institutional credit systems such as non-banking financial companies across rural India will discourage selling back gold to raise cash because consumers will find it easier to pledge their golds instead of selling it outrightly.
World Gold Council – About
- The World Gold Council is a market development organization for the gold industry.
- It works across all parts of the industry, from gold mining to investment, and their aim is to stimulate and sustain demand for gold.
- The WGC was established to promote the use of and demand for gold through marketing, research and lobbying.
- The market development organization of WGC for the gold industry includes 25 members and many gold mining companies as well.
- World Gold Council is headquartered in London, and has offices in India, China, Singapore, Japan and the United States.
- The WGC covers the markets which comprise about three-quarters of the world’s annual gold consumption.
Candidates should follow the latest developments in Current Affairs related to other government schemes for their UPSC 2023 preparation.
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