New Delhi, May 19 -- In prosperity, as in the hour of need, the thoughts of most Indians turn to gold. And with the steady drain on our foreign exchange reserves for over two years now, we have reached a stage as a nation when the question is being asked whether we could utilize the idle gold hoards of the people to see us through the critical years ahead. No less a person than the Prime Minister voiced this feeling at a recent meeting."

These words were written in 1958 by I.G. Patel, then a senior official in the finance ministry who would rise to become governor of the Reserve Bank of India in 1977.

The Indian appetite for gold is once again in the news. The current Prime Minister has asked citizens to suspend new gold purchases for a...