The Indian government introduced a Gold Monetization Scheme and a Sovereign Gold Bonds Scheme. One of the key intentions of the former is to eventually source a part of India’s gold requirements locally, taking some of the pressure off of imports and thus the current-account balance, UBS explains.

“More generally, these initiatives hope to tap into wealth held in the form of gold jewelry, ornaments and small investment products and put this to work in the wider economy,” said analysts at UBS.

“The success of these schemes largely depends on how attractive they would be to the public – a comprehensive understanding of the specifics is important in order to come up with a reasonable assessment of the prospects. The impact on gold demand and the wider gold market is unclear at this stage, although as we've argued previously, we think that the long-term nature of these gold policies suggest limited near-term effects,” they added.

Wednesday’s announcement contained general information but not much detail on how the programs will be structured. The Reserve Bank of India is expected to issue more detailed guidelines in the future.

Source: http://www.bullionstreet.com/news/impact-of-indian-gold-initiatives-unclear-ubs/7871?