As we have discussed numerous times, India's ban and tariffs on gold imports (supposedly to protect their current account balance) is having numerous unintended consequences. From flights full of gold-laden passengers entering the country [3], to trying to roll-back centuries of tradition surrounding Indian weddings [4], the capital control efforts are back-firing as the smuggling epidemic [5] spreads. The foolishness of this 'control' is also spreading as Pakistan has noticed the surge in smuggling, concerned at a steep increase in import duties on gold in a "neighboring country," and has imposed a 30-day ban on gold imports to curb the 'trade'.
- *PAKISTAN IMPOSES TEMPORARY 30-DAY BAN ON GOLD IMPORTS
(Via Bloomberg)
The ban is only to stop the smugglers...
Ban to curb smuggling without affecting legitimate demand-supply
Which of course will always wear a patch over one eye and skull and crossbones bandana to ensure officials can tell them apart from the legitimate demand-meeters...
But what is there can be exported...
Export of gold to continue without any restriction
At a nice profit to the high-premium-paying Indians.
Of course, this is not about managing the status quo or manipulating gold prices, this is about managing the FX rate (because the reason the rupee is tumbling is all about gold and nothing to do with fast money outflows thanks to the Fed)...
Impact of gold smuggling on Pakistan rupee exchange rate raised by foreign-exchange traders at recent meeting
This is not the first time they have tried such a plan...
Pakistan had imposed a ban on duty-free import of gold on July 30 for 30 days on concern rule was being misused and imported gold was being smuggled to India
So, of course, that worked so well before that they will just keep repeating the same failed plan...?
So India's efforts have led to Pakistan's controls... what next? Tell the Chinese to stop or the Blangladeshis... or Myanmar and Sri Lanka?