Submitted by Mike Krieger of Liberty Blitzkrieg blog,
This story is just further proof of the complete and total mess that has been made of the Indian gold market over of the course of this year due to government intervention. We noted 2 days ago that the premium for physical was rising, but now it is at a record. The other part of the problem is that when you are dealing in physical supplies you can’t just deliver paper contracts. Somehow I don’t think that would cut it for Indians on festival days or their daughters’ weddings.
(Reuters) - Gold premiums in India, the world’s biggest buyer of the precious metal, hit a record $100 an ounce, about 8 percent over London prices, on a shortage of supplies to meet festival demand, traders said on Tuesday.
“There are no supplies in the domestic market, and there is a little demand due to festivals… what little supplies that come, go to exporters,” Bachhraj Bamalwa, director at the All India Gems and Jewellery Trade Federation (GJF) told Reuters.
Most suppliers in Mumbai and Kolkata have started quoting premiums in excess of $100 an ounce above London prices, more than double the $40 charged last week, Bamalwa said.
Gold imports have virtually dried up in India after the federal government introduced the 80/20 rule, creating confusion among government officials on its implementation and halting shipments for about two months.
The World Gold Council has said India’s gold demand could rise as much as 15 percent this quarter to 300 tonnes as pent-up demand following a good monsoon keeps the country on track for yearly demand estimated at 1,000 tonnes.
If that demand number is correct, then India and China alone are on track to consume 75% of the world’s total gold production in 2013. Fortunately for them, Western investors are more than comfortable accepting pieces of paper.
Full article here.