India To "Look Into" Easing Gold Price Controls

Tyler Durden's picture

Two weeks ago, gold jumped to a then-2014 high, following reports out of India that the head of India's Congress Party, Sonia Gandhi was pushing the government to cut its duty on gold and other restrictions. Today, now that the upward move in gold has finally resumed, it appears that the nation with the world's most draconian gold capital controls, is finally starting to crack under pressure from the people, as well as a surge in gold smuggling via illegal channels to unprecedented levels. Reuters reports that India "will look into relaxing gold imports curbs, but won't let its current account deficit (CAD) balloon, Finance Minister P. Chidambaram said on Monday."

More:

"There are pros and cons (on easing gold import curbs), we will weigh them carefully, the goal is to contain the CAD at a level where it can be fully and safely financed," Chidambaram told reporters after presenting the interim budget in parliament earlier.

 

"The operative word is, we will look into it," he said.

 

India, desperate to trim a gaping current account deficit, took a slew of measures last year to curb demand for bullion, its second-biggest import after oil.

 

Industry participants had expected a cut in import duty from the record 10 percent on gold in the interim budget.

 

Due to the restrictions on imports, China has surpassed India as the world's biggest buyer of gold.

Of course, to borrow a line of thought from economists, while China may have overtaken India in official gold transfers the Indian demand for gold is still there, "pent up" and as vibrant as ever, and in fact should the government finally undo one or all of its anti-gold capital controls, all demand hell may break loose.

Just how pervasive are said controls? Below is a partial list we put together last year. Should the government's resolve begin to truly crack, the "price discovery" result could be more violent than if the PBOC were to announce today what its true gold holdings currently are.

  • Jan 21 - The government raises the gold import duty by 2% to 6%.
  • Jan 22 - The government more than doubles the duty on raw gold to 5%.
  • Jan 30 - Finance Minister P. Chidambaram says there are no plans for additional taxes or curbs on gold imports.
  • Feb 1 - The Reserve Bank of India (RBI) plans to introduce three or four gold-linked products in the next few months.
  • Feb 6 - The RBI says it would consider imposing value and quantity restrictions on gold imports by banks.
  • Feb 14 - The central bank relaxes rules on gold deposit schemes offered by banks by allowing lenders to offer the products with shorter maturities.
  • Feb 20 - The Trade Ministry recommends suspending cheaper gold jewellery imports from Thailand.
  • Feb 28 - India keeps its gold import duty unchanged in its annual national budget, defying industry expectations.
  • Feb 28 - India proposes a transaction tax of 0.01% on nonagricultural futures contracts, including for precious metals.
  • March 1 - The Finance Minister appeals to people not to buy so much gold.
  • March 18 - The Reserve Bank of India says it is examining banks that sell gold coins and wealth management products to identify "systemic issues", with a view to closing any legal loopholes.
  • April 2 - The Finance Ministry suggests it is unlikely to raise the import tax on gold further to avoid smuggling and would instead introduce inflation-indexed instruments.
  • May 3 - The RBI restricts the import of gold on a consignment basis by banks.
  • June 3 - The Finance Minister says India cannot afford high levels of gold imports and may review its import policy.
  • June 5 - India hikes the gold import duty by a third, to 8%.
  • June 21 - Reliance Capital halts gold sales and investments in its gold-backed funds.
  • June 24 - India's biggest jewellers' association asks members to stop selling gold bars and coins, about 35% of their business.
  • July 10 - India's jewellers announce they might continue a voluntary ban on sales of gold coins and bars for six months.
  • July 22 - The RBI moves to tighten gold imports again, making them dependent on export volumes, but offers relief to domestic sellers by lifting restrictions on credit deals.
  • July 31 - India hopes to contain gold imports well below the 845 tonnes that were shipped last year, the Finance Minister says.
  • Aug 13 - India hikes the import duty on gold for a third time in 2013, to 10%. Duties for silver and platinum are also increased to 10%. The customs duty on gold ore bars, ore, and concentrate are increased to 8% from 6%.
  • Aug 14 - India turns the screws on gold buying again, banning imports of coins and medallions and making domestic buyers pay cash.
  • Aug 29 -  India considers plan to allow commercial banks to buy gold direct from ordinary citizens
  • Sept 19 - India hikes import duty on gold jewerly to 15%

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Pool Shark's picture

 

 

Cost only $5 to dig them out of a computer...

 [sorry fonestar; you and Bitcoin have jumped the shark...]

kliguy38's picture

Enter the Fed with another "gun to the head" to the Indians........ Either you halt the gold sales or we'll have Pakistan nuke you

Oh regional Indian's picture

Like any pol, he speaks with forked tongue AND from both sides of his mouth.

India's gold story has one more crazy ywist, internal production. Three, tiny, government controlled mines...here is an interesting article, opening line says it all...the scam is deep and wide at every level...

"It is indeed ironic that two of the things that Indians love to spend on — gold and fuel — are produced in such miniscule quantities in the country."

 

http://www.thehindubusinessline.com/opinion/digging-for-gold-once-again/...

dannyboy's picture

Not only illegal but very creative ways they are smuggling gold into India.

From Times of india: "Gold melted into seed-shaped chips and hidden in dates coming from Dubai, bars broken into granules and mixed with other metals to make it look like ore, belts with one kg gold buckles and torches carrying gold batteries. As gold smuggling reaches unprecedented high and authorities crack down, smugglers are devising ever-new ways to bring in the yellow metal.

http://articles.timesofindia.indiatimes.com/2014-02-09/india/47168063_1_...

akak's picture

Wow, battery-powered torches?

Cavemen, eat your hearts out!

What will they think of next?

Skateboarder's picture

Indians say "torchlight," not "flashlight."

akak's picture

So, then, what do they call REAL, i.e. flaming, torches --- 'flashlights'?

;-)

Skateboarder's picture

I believe it would be just "light."

:D

MeelionDollerBogus's picture

I'll hazard a guess. If a smoke is a 'fag' in British slang perhaps a real torch is a 'flamer' ?
LOL

StychoKiller's picture

You can blame the English for that.

akak's picture

And so much else, such as the ubiquitous surveillance cameras in every city.

Apparently, the British mistook the book "1984" as a blueprint instead of a warning.

HardAssets's picture

Millions of Indian people with experience going back thousands of years want gold, but politicians & bureaucrats say No ?

Yeah, that's going to work.

Note to self when off iPhone: Check resumes of Indian 'officials'. How many are products of Anglo-American 'schools' & formerly with such firms as GS ?

Truthseeker2's picture

This article explains exactly what is going on with India and its capital controls on gold purchases.

*

Feud Between USA And India Goes Prime Time

*

http://stateofthenation2012.com/?p=3164


 

 

Mad Mohel's picture

You should have come back as MDB (MillionDollarBitcoin) but then it wouldn't have been as amusing.

douglas's picture

I´m scared, really scared - I gotta keep posting this:

Reflecting on how significant up-days scare me more, here's a (slightly modified) post of mine from a down day in metals...

If at this stage you are not COMPLETELY convinced that PM's are highly manipulated to maintain control of a colapsing fiat monetary system then you probably have no business owning any precious metals besides personal jewelry - I would recommend that at this point you stop reading here, close out Zero Hedge and turn on MSNBC.  

If on the other hand you are awake and can see that not only are we waist-deep in manipulation but ever-nearer to a Global Monetary Colapse, then you should be COMPLETELY convinced that it's only a question of time before TPTB lose the ability to continue said manipulation.  If this is the case you should like me be rooting for the price of PM's to go down so you can acquire more. Rather than complaining about the manipulation, be thankful for it and continue to increase your holdings. After all, the day TPTB finally lose control, the world will become a much sadder place and comforts which we now enjoy will go away for the majority of the people of this world - in fact I suspect there will be significant loss of life...  Widespread wars could affect even those of us that have prepared for the worst.

Heres something to think about (coming from someone who is well over 60%-In PM´s, with physical holdings as large as 99% of any ZH´ers) ... The best part of all this is that even if we´re wrong about the current economic situation (which all evidence proves we are not) your life will be no worse for having a large horde of Gold and Silver, on top of that you'll sleep much better...  Note:  I hope its my paranoid instinct, but this current move up scares me more than any recent one, I´ve got a bad feeling that this could be ¨THE ONE¨...

Seeking Aphids's picture

Yes D this move up seems different....the huge move up in silver really confirms it to me (in the past the moves up by gold have been timidly followed by silver - not this time!).  What do the ZHers from the sub-continent think about the possibility that the upcoming elections could force the government to relax restrictions on gold? My guess is that they will do so to get votes and as the main opposition is running on the platform of reducing the restrictions, correct? If there is such an announcement I would expect to see gold blow past $1400 on its way to $1500 by the summer.....just my guess based on current consumption levels in China.....

RaceToTheBottom's picture

"coming from someone who is well over 60%-In PM´s, with physical holdings as large as 99% of any ZH´ers) ..."

 

How could you possibly know what others on ZH have?

Croesus's picture

Y'all downvoted Fonestar, but I'm with him...DotGov tells Indians "You can't buy that barbaric relic, unless you pay 10% to us...Goddamn shakedown, if you ask me. 

"You can't buy Gold, unless you pay the vig, because it's making us look bad...". <--Indian DotGov position. 

What's wrong with that picture? 

greatbeard's picture

I don't think he's being down voted for content, but come the fuck on, does every thread now have to be a all about phonestar thread?  Phonestar, give it a god damned fucking break for crying out loud.

fonestar's picture

This forum being used to try and attack Satoshi's creation.  Fat chance on that.

greatbeard's picture

>> try and attack Satoshi's

Everything and everybody is attacked vociferously on this forum.  If Satoshi and Bitcoin can't stand the scrutiny maybe they deserve to be attacked.  You are doing more damage to your "cause" than anything I've seen posted on here.  But go ahead, continue to trash every thread in an attempt to make friends.

silvermail's picture

"This forum being used to try and attack Satoshi's creation.  Fat chance on that."

Attack can only be on that which exists in reality. No one can attack myths  about any Satoshi, Katoshi, Fatoshi  and your blind bitcoin religion.

CPL's picture

No man, it's an idea pit.  All these people here are idea pit fighters.  Unlike the current POS fiat regime, if earth is going to adopt another currency, it is NOT going to be dictated by a boardroom.  So BitCoin or ANY currency we all want to operate with needs to go through it's academic defence that is not limited to:

  • Rebutals
  • Answers
  • Queries
  • General discussion
  • Examples
  • Testing
  • Idea consolidation
  • Process development
  • Circus barking
  • Haggling a method
  • All of it.

See the list.  Guess what was never done publicly by the people that actually USE a currency in their daily affairs?  That list has NEVER been done on Fiat.  Never, not once in the recorded history of the dollar, or the pound or whatever worthless asswipe people like to pretend is money controlled by a tiny, minuscule and disconnected group that haven't worked a day in their lives.

So to build a currency everyone can use, we've all got to kick the tires on it.  Test it out.  Play with it.  Sculpt the final product so it can be used by anyone.  From an Accountant in Zimbabwe to a Zoologist in Alaska. 

Don't allow impatience to drive development, it's a shitty place to be.  Mistakes are made doing that and guess what?  This is all very new.  New in the sense a currency is being adopted to migrate one dying system with another.  New in the idea that people, like anybody, can print it (with a lot of GPU time, power and IRL time).  New in the idea that labour from one country to the next can be priced the same (this one scares the piss out of the 'developed' world, whatever that means now).

I like the idea, but before ANY tweaked, engineered, tuned, built system makes it into production.  Keep it in mind, that this is technologically more advanced than any financial system available right now; yet follows the simplicity of PM's in terms of process AND allows for equal share in a world of 7.2 billion people.  It is the definition of faith in fiat.

But it's gotta be tested and understood by more than just techies.  A nice balanced approach where everyone examines it and analyses it's faults and features.  The adoption will not be mandatory, if people want to trade with it, they will.  Organically.  Instead of the forced approach of today where the illusion of choice in banking is because the people that make the money also put the dispensers on every corner, mall, Bodega, etc.  Crypto currencies should only be a choice, not dictation.

In the meanwhile, relax.  We don't have to do anything.  TPTB are running QA and testing on BitCoins for us.  It just took the correct motivation to get it to happen.  In this case TPTB is driven by FUD and anger, which is the very definition of a QA cycle.  So you angle the pool shot with the given environmental variables.  And they've been AMAZING at finding the faults and what breaks in crypto currencies, better than any one of us could have done in eighty lifetimes.

 In this case, the general level of stupid and reactionary judgment the economic system exhibits today.  It's PERFECT to test it out.  They didn't even know they were providing the all important service of testing things we didn't even think of.  Like how Huck Finn convinces the loud mouth kids that white washing a fence is great fun.

To all of those that are finding faults and break points in the process working in TPTB.  Thank you, great job.  Unlike the current fiat regime, we can patch and repair when they are pointed out.  All of this helps develop a better deployment and it didn't cost a dime to do it.  Just had to use those powerful tools of anger, stupidity and greed to point out where the wheel gets the grease.

CPL's picture

I should also point out that with the "QA cycle" TPTB are accidentally helping with, it's a trap of sorts.

TPTB are showing us all how they currently manipulate money today by taking swings at BitCoin using their rigging and "magic tricks".  Except when the tricks are applied to BitCoin, they get logged and published publically to all the holders of BitCoins.  Most of whom are math addicts and have found root cause and process for every 'testing cycle' on BtC.  All the dirty tricks out in the open for everyone to see.

...and since the FBI is currently one of the largest holders of BTC wealth on the planet.  The FBI can now see exactly how shady the practice of Forex is just by reviewing a much better organised paper trail in logs. It will help see the exact methods TPTB uses today to drain the value out of pensions, paychecks and daily life.  Should make their jobs easier when it comes to trial to offer evidence on the manipulation used against all the people on Earth, including themselves.

Neat huh?

 

DoChenRollingBearing's picture

Very interesting thoughts and take on this, CPL.

MeelionDollerBogus's picture

Trial? They ARE the cops & judges.
I think you're still not getting the full picture. Those who ARE the law can never be held PUNISHED by the law.

oddjob's picture

How is force feeding them their own FIAT bad in any way?

silvermail's picture

Bitcoin?

No, no, thank you. I'd rather invest in a bull shit than bitcoin.

fonestar's picture

If you don't own Bitcoins, then I guarantee you are invested in bullshit.

akak's picture

I guess that is true, as Fonestar has been owned here on ZH by just about everyone.

agent default's picture

You  are beyond redemption aren't you.

Quinvarius's picture

All they need to do is quit pretending gold is not money and correctly account for it as such.  They are fighting a problem that does not exist because they were asked to by the Western CBs.  In the process of ignoring reality they are crippling their own economy by penalizing a major part of what their economy uses as wealth and collateral.  Good job jumping on that funeral pyre with the US dollar, India. 

Mad Mohel's picture

Some bootlicking politicians are not going to erase thousands of years of culture and tradition. They will eventually take one step too far and will ignite a firestorm in a population that already has massive poverty.

fonestar's picture

Here's a serious question for the supposed ZH libertarians... if TPTB are really all powerful (as they claim) then why don't they simply mandate that both Bitcoin and gold are worthless?

ejmoosa's picture

Perhaps they can mandate that the sky is pink as well....

fonestar's picture

Well that's what fonestar is getting at.  They're not "all powerful"... as a matter of fact, they are just common criminals who have convinced some of the Bieber fans they lord over that they are legitimate.  They don't have control over markets, they don't have full control over their citizens and I doubt they even have full control over their own militaries which will likely betray them (as they historically do).  Basically just a bunch of kiddie-diddling, satan-worshiping scum convincing themselves they are Gods.

eclectic syncretist's picture

Your dumb ass will be washed away with the money launderer's soon enough.  You could still post from the local library though, if you aren't already.

fonestar's picture

There won't be such a thing as "money laundering" in the future.  Just people doing what they want to do.  If fonestar wants to send the equivalent of $5 Billion to Syria that's only his business.

silverserfer's picture

fonestar is living proof that ZH can contract herpes.

fonestar's picture

What has greater density?  Your shiny bars or that block on your neck?

Bendromeda Strain's picture

then why don't they simply mandate that both Bitcoin and gold are worthless?

Because that would be self-defeating. Once the doomed dollar craps the bed, expect them to declare that not only is their superceding cryptocurrency "Americoin" valuable, but also legal tender, exclusively. Senior citizens will get large button phones with Americoin Wallet shortcuts built in.

Quinvarius's picture

Gold is trading at 9.5% of the lowest valuation I can find by math.  And if debt represents money we will print in the future, the targets are only higher.  They are trying.  They really want to pretend they can print as much unbacked paper as they want, and have it accepted as wealth.

FredFlintstone's picture

Can you share a few examples of your assumptions and calculations? Thanks.

Quinvarius's picture

The monetary base (M0) is 3.8 trillion.  The gold the US claims to have is 270 million ounces.  3800 / .270 = $14074 per ounce.  And before you freak out, in the early eighties, gold peaked at 130% of what it needed to cover the monetary base before coming back down to 400-500, which was the correct price.  Then you have to remember the m0, m1, m2, m3 numbers do not account for USD outside of the USA, they only count what is in the US banking system.  And the US Fed already admitted it it leases (sells) US gold it was trusted to store.  So there is no way they actually have 270 million ounces.

DoChenRollingBearing's picture

Please do remember that US national gold is (mostly) held at Ft. Knox.  The Fed (NYC -- FRBNY) holds a small amount of US gold, but most of the gold held at the Fed belongs to other countries, including Germany.

DoChenRollingBearing's picture

Please do remember that US national gold is (mostly) held at Ft. Knox.  The Fed (NYC -- FRBNY) holds a small amount of US gold, but most of the gold held at the Fed belongs to other countries, including Germany.