Indian Government Seeks To Quell Panic: "No Plan To Restrict Gold Holdings"

Tyler Durden's picture

Amid increasing social unrest, a collapsing currency (against the dollar), and an economy at a standstill, there has been another growing fear in India that has spooked many around the world.

The rumors and speculation of an Indian gold import ban (or even an outright ban on gold ownership) have sparked panic-buying of the precious metal sending retail premia soaring at local jewelers. In an effort to quell the 'uproar', a top Indian finance minister has confirmed the government is not considering an plans to restrict holdings of gold by individuals.

As a reminder,'s Pater Tenebrarum notes that in the recent past, India’s government has also launched several initiatives aimed at reducing gold purchases by Indian citizens. For one thing, it is asserted that the gold hoards held by citizens are “unproductive” and a sign of India’s backwardness that needs to be eradicated in the name of modernization. Another  official reason is that government wants to lower the country’s trade deficit. Since India isn’t producing much gold, it is importing quite a lot; in recent years gold imports oscillated around 700 tons per year.



India’s trade deficit over the past decade – cick to enlarge.


The world’s governments are almost without exception comprised of  economically ignorant mercantilists who believe that a trade deficit is a symptom of declining wealth. Naturally, India’s government is no different in this respect. This mercantilist view of trade is one of the most “sticky” and widespread economic errors in history (evidently, not only prices and wages are “sticky”…). It is a direct result of viewing the economy through a collectivist lens instead of through the lens of methodological individualism. The government’s efforts included raising a tariff on gold imports (ever since, India’s gold import statistics are no longer reliable, as a lot of gold is smuggled in), as well as urging the creation of assorted “paper gold” products by commercial banks.

The latter were supposed to entice citizens to deposit their gold with banks in exchange for paper receipts. You have one guess why the government would be eager to see that happen.

India’s citizens have a traditional affinity for gold. Gold is not only a “love trade”  for Indians though, as our friend Ronnie Stoeferle puts it. They also buy gold because they don’t trust their government and its economic policies.



Looking good, ma’am.


As has just been demonstrated again, this is quite a healthy attitude – even if the  government of the day is widely considered to be “good for the economy” (Mr. Modi’s government has indeed adopted a number of positive economic reforms as well in the past). Not only can it be very costly to trust the government, there is obviously also a big difference between looking at and fondling actual metal, as opposed to a bank receipt for a gold deposit. If you try it, you will see it is just not the same. Indian women love gold adornments and gold jewelry plays a major role as a wedding present that concurrently serves as a store of wealth. Hence the government’s efforts to “wean the citizenry off gold” have completely failed to gain traction.

It remains to be seen if the government will get away unscathed with the recent demonetization of large denomination banknotes. As Jayant has pointed out, Mr. Modi has actually enjoyed widespread popular support for the measure – at least initially. Certain segments of society continue to be supportive, depending on the degree to which they are actually affected by the ban.



The degree of Modi’s support is presumably inversely proportional to the length of time spent in such queues.


After two weeks of increasing chaos and ample demonstrations of government ineptitude, the political opposition has finally decided to join the fray and is now beginning to forcefully denounce the measure.

Parliament was adjourned after an “uproar” over the currency banthe opposition is organizing an “all India protest” for November 28, as it is now united in opposing the ban.  Moreover, allegations that the plan was leaked to certain people in advance have surfaced (that wouldn’t surprise us one bit).

As Jayant has rightly pointed out in the third part of his articles on the currency ban, the evolving situation is forcing the government to continually issue new ad hoc decrees in order to stop people from successfully fighting the edict.

Similar to the attempts of the post-revolutionary assembly of France to defend the assignat in the late 18th century, it is resorting to increasingly repressive steps (the most recent one is that it has apparently suddenly shortened the grace period for banknote exchanges, concurrently with announcing that it will impose a  tax penalty on “too large” deposits).

This has led to speculation that gold may be in the government’s cross hairs next.  As the thinking goes, if it can ban certain banknotes, surely it can also enact a ban on gold imports? As an aside, an outright ban on gold ownership seems highly unlikely, as that would probably cause more than just an “uproar”.



Banning gold ownership is out of the question.

Also, some of the largest gold hoards are held by temples – in other words, the country’s religious establishment would undoubtedly be less than amused.

*  *  *

And so, clearly seeking to calm these fears, a top finance ministry source said on Friday that the government is not considering any proposal to restrict holdings of gold by individuals. As The India Times reports, following the demonetisation of 500 and 1,000 rupee notes in a bid to crack down on black money, there were apprehensions among people that the government might impose some kind of restrictions on gold holding by individuals.

"There is no such proposal before the government on restricting domestic gold holding," the source said.


There were reports that many people have converted their black money into gold following the announcement of demonetisation of high denomination currency notes by Prime Minister Narendra Modi on November 8.

Of course, we note that there was no official denial of any proposals to impose a gold import ban.

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AmandaFawndel's picture

"Everyone will save $2500 on their healthcare insurance"

Pinto Currency's picture

No such plan before us.
You didn't ask if it was beside us.
Your gold is hereby confiscated.

Nobodys Home's picture

I am standing herre beside myself. What too doo in this currrent conundrrum.

Ms No's picture

They have a central bank which is ruled by the federal reserve and friends, just like nearly everybody else.  They better watch their gold statues or these parasites will have their gold Buddhas looking like Ghandi in short order.

FinalEvent's picture


It's officially denied.

I know enough.

BaBaBouy's picture

We don't need your GOLD... Yet.
We'll give you 12 Full Hours Notice WHEN we do need it ~~~

Holy hand grenade of Antioch's picture
Holy hand grenade of Antioch (not verified) BaBaBouy Nov 26, 2016 3:06 PM

Dot gov 2 DOT people... Hold all the gold u want... hide it way up your asses if you want...


What WE propose is to TAX THE SHIT OUT OF IT (literally & figuratively).


Bend over  & see how it feels

pathosattrition's picture

Sounds oddly similar to "the BOJ is not considering negative interest rates"

Muddy1's picture

If you like your gold you can keep your gold.

ufos8mycow's picture

"We Goldfingered some folks."

Manthong's picture

1.    I do not hold the Indian government and it’s stewardship of the second most populous (heading to be first) nation on earth in high regard.

2.    That having been said, I am critical of ALMOST ALL NEWS VENUES, including ZH, for not accurately reporting the recent 500 and 1000 Rupee note maneuver.

It is my understanding that the sudden, poorly executed demonetization of those notes was a ploy to flush out old hoarded (for whatever reason) notes.

They are replacing (ineptly) them with new 500 and 1000 notes.

Note the “note” proposition,

It’s why you don’t want to hold you wealth in F’n bank or government notes or in bank controlled electronic digits.


“A baited banker thus desponds,
From his own hand foresees his fall;
They have his soul, who have his bonds;
'Tis like the writing on the wall.”

-Jonathon Swift, 1720


Except now you have all the western governments in collusion with the criminal banking syndicates  F’g economics up into an Orwellian nightmare.


Buckaroo Banzai's picture

Price of gold on Monday will tell us if the market believes this.

Max Hunter's picture

Damn all this fear porn and the price of gold is still in the shitter.

fbazzrea's picture

everything in its season... buy low. sell high.

Uncle Sugar's picture

C'mon $500! Been waiting a long time.

Ms No's picture

If this is starting starvations for the poor, and purportedly it is, wont some people in the middle class come under stress and have to start selling their gold to survive?   

BennyBoy's picture


"There is no such proposal before the government on restricting domestic gold holding..."

...but there will be a such a proposal before morning...

AnngeloJamaica's picture

Take those who think they can rule and control and hang them on a lamp post. Like in the Days of Rome.  Opps they were crosses then.  My bad.  

AC_Doctor's picture

Gold and Silver, the only true moneys.

redc1c4's picture
"No Plan To Restrict Gold Holdings"

which, of course, means they are thinking of restricting gold holdings...

EuroPox's picture

Yup, sounds like more #FakeNews

KnuckleDragger-X's picture

I've got this bridge in Brooklyn I'm willing to sell at a special low price.....

AnngeloJamaica's picture

Name you price and do not be shy, I will pay whatever you wish, I have didgital something or other and will be most happy to add as many zeros on the end of the 1st didget as you wish.

If you wish payment in any other denomination I am her to inform you that it has been banned.


irus's picture

yes it was limit of 500 grams per person.

Testudo321's picture

And right you are...

While Yugoslavia still existed, people learned to "read between the lines".

So when government officials  gave interviews and said something like " The inflation is finally under control." or "The rumours of  Dinar being devaluated are not true.", "Yugoslav economy is on the rebound." and "I present you the new convertible Dinar !" they knew there are troubles ahead.

_ConanTheLibertarian_'s picture

Yup. We know what an official denial means, don't we.

U4 eee aaa's picture

it means .gov is officially in denial


Testudo321's picture

" No Plan To Restrict Pitchforks. Or Sharpening tools..... "

TruthHunter's picture

Like the demonetization, no plan, Modi just did it.

Vardaman's picture

"No Plan To Restrict Gold Holdings...  For now..."

booboo's picture

So it's official, they are going to restrict gold holdings.

Ms No's picture

"We wont restrict gold holdings until after the second wave of starvations.  Then the people starving will provide support for our gold heist."

HenryHall's picture

Beatings will continue until morale improves.

irus's picture

Now thats more like it. Demonetisation had banksters written all over it. Seems like this is a populist move afterall and not an elitist one. Go Modi.

847328_3527's picture

If a ruler really values his nation and his people, he would encourage them to hold as much gold as possible. If the citizens are wealthy, the nation is wealthy.

buzzsaw99's picture

yeah sure, that's why so many indians shove three pounds of gold up their anus

AmandaFawndel's picture


irus's picture

it is a currency replacement because of counterfeit money flowing in not cashban. 

AmandaFawndel's picture

So BANNING bills worth $7.50 and $15.00 is not a cash ban?




irus's picture

it is replaced with even bigger bill of INR 2000 ($30) and new INR 500 bill

RU4Au's picture



Wisely stated. For those that may not have grasped the full flavor of that statement...

Seems the cause and effect of the above might need to be considered. I argue that cash itself will empower a people and make them more free, whether the .gov trusts them or not.  Once the .gov no longer trusts the people they remove cash for control and some degree of freedom is lost.

<sarc>But it is for our own good, of course. And we certainly must assure that .gov trusts us.

blargg's picture

...and only precious metals can be trusted as cash.

alexcojones's picture

Name ONE example when the Government ever spoke the Truth?

Oh yeah, recall what that Great Indian chief said about DC.

"They made us many promises, more than I can remember, but they never kept but one; they promised to take our land, and they took it."   -  Red Cloud


Dragon HAwk's picture

We Have No Troops In Cambodia.

kellys_eye's picture

Plan #2 - go to war (with Pakistan) to detract from economic difficulties.

Now where have I heard that before?

Elco the Constitutionalist's picture
Elco the Constitutionalist (not verified) kellys_eye Nov 26, 2016 2:31 PM

War with Pakistan is more likely considered as population control than a distraction.

rockstone's picture

In that case I wholeheartedly support it.

Joebloinvestor's picture

I expected Modi to be dragged down a street and hung from a lamp post.

And Indians make fun of Pakistan.