Over the past year India's attempt to impose price controls on gold imports has only achieved one thing: forced citizens to find ever newer and more creative means of smuggling gold. It has gotten so bad Indians are now smuggling the yellow metal through Pakistan, on airplanes, and has now even surpassed the illegal drug trade. Which perhaps is why the biggest news in the commodity space overnight was the appeal by India's Congress party chief, Sonia Gandhi - widow to Rajiv - to the government asking for a cut in the record import duty on gold and for other restrictions to be eased, television channel CNBC Awaaz said citing sources that it did not identify. Reuters adds that "the coalition government, led by Congress, is considering easing restrictions, which include a 10 percent import duty and a rule that says 20 percent of all imports must leave the country as exports, government sources told Reuters earlier this month. India used to be the world's biggest buyer of bullion until the government introduced the curbs in order to contain a record current account deficit."
Judging by the spike in gold on the news, two things are apparent: Gandhi may just get her wish granted, as nobody buys the official story scapegoating gold as the reason for the relentless Indian trade deficit. Second, India may soon regain its role as dominant buyers of gold, after massive pent up demand by Indian retail buyers is unleashed on the world, sending the price of gold soaring.
Should that happen, the holdings of the GLD ETF may need to slide below zero in order for sales of imaginary paper gold to offset ever rising demand for physical.
And in other, far more humorous news, China announced that its gold reserves remained unchanged at the end of 2013, at 33.89 million troy ounces, the same as it has been for the past 5 years.
Needless to say, absolutely nobody believes this particular Chinese number.