Posted in Finance, Accounting and Economics Terms, Total Reads: 59
Definition: Gold Certificate
Gold Certificate is a legal paper held by a person or a financial intermediary which shows its ownership for the specified amount of gold which may be kept for storage or given for the investment purpose to a legal financial entity. Like a receipt it is a proof of deposit made by a depositor.
Gold certificates are provided on the basis that the certificate is compared with gold bars of specific weights. Here the banks keeps the gold as under a custodial or a contract. Gold certificates provides the owner a sense of safety and convenience as it is stored by the financial intermediary. He also earns interest on it. The other benefit the depositor gets is he does not have to pay for the storage and got an insurance of getting it back whenever he demands. It also provides the owner a facility to either convert it into gold or in the form of money when he demands.
The drawback for this is it requires some minimum amount of gold to get it converted into certificate so all the retail investors cannot benefit from it and even the interest returns on it are very less.
Gold certificate schemes is in practice since 17th centuries during which the goldsmiths used to issue gold certificates to the customers who used to deposit gold with them. Those certificates were then used as a mode of payment for buying different commodities from the market.
US issued Gold certificates of various denominations ranging from minimum of 10$ to maximum of 100,000$ during years 1928-1934.
Indian Government launched the Gold monetisation scheme in 2015 under which they issued gold certificates with maturity period of one to five years. Interest would be given on this certificates and it can also be used as collateral if the issuer asks for the rupee loans.