Can Kerala’s investors get iron-clad protection from gold scams?

Gold prices are surging ever higher – and these days it’s happening in a matter of hours.

So much so, shoppers - if there are any still wanting to buy at current levels - don’t even have time to think through their actions. In Kerala, quite a few of these hapless investors are already paying their price for mindlessly believing promises of being to get rich through investing in gold.

The most unfortunate part is that the get-rich schemes prey on one of the most obvious weaknesses families in Kerala (and India) face – weddings and their innate connection with the transfer of gold from the bride’s family to the bridegroom’s.

It’s a time-honored arrangement, and whatever the laws of the country say, society prefers that gold and jewellery changes come wedding time.

So, when licensed businesses come with the promise of delivering more from gold, there are always the easily duped who fall for the schemes. And in most cases, go through the sheer misery of what it does to getting their daughters married off.

There have always been the fly-by-night scam artists operating on the margins and preying on gullible.  These days, the difference is that properly licensed operators are getting into the fray – repeating the same claims of delivering riches to those ‘investors’ who sign up for their offers. Lifetime savings end up being lost and entire families devastated.

Even worse is that these instances keep happening again and again. There is no such thing as enough families in Kerala are learning from others’ tragedies. They just aren’t.

You have those wealthy and the ‘knowledgeable’ falling for a scamster telling them he’s in possession of swords, trinkets and other personal effects that were ‘used’ by characters in Indian mythology. These ‘well-informed’ individuals didn’t seem to care that these were tied to ‘myths’. They ended up losing their investments and a lot of their pride – but they survived.

The same can’t be said about those from low-income households who are putting together most of what they own into their daughters’ weddings. They sign up for ‘ultra-transparent’ investments with the promise of instant returns on their monies. Or gold holdings. To end up losing all – the fortunate are those who are able to recover part of what they put in.

India’s regulators need to tighten the game – much as they did when it came to investing in the stock markets after the Harshad Mehta scam of the early 1990s. It’s a process that never must stop as scamsters get ever more sophisticated in their ways to dupe.  Those trading platforms need to be regulated at all points of the funding cycle. Any blip and it will be the smaller investor who will feel the brunt of the losses.

This is also the point where the Kerala Government has to step in. Gold exchange offers must be tied to businesses that meet regulatory requirements on capital and the kind of risks they can take on. The authorities can’t wait for more mishaps to happen before they do anything. There’s no point in the Enforcement Directorate or the tax officials turning up at an offending business after they have fleeced off investors.

Don’t expect Keralites to lose their fascination with gold – the best authorities can do is make sure they don’t get duped, again and again…