India's government seeks to dissuade people from investing in gold

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benjamen

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http://www.24hgold.com/english/news...10020&redirect=false&contributor=Chris+Powell

"Worried over the flow of savings for investment in gold, Finance Minister Pranab Mukherjee on Saturday said there is a need to spread financial literacy to encourage people to invest in market instruments."

"Time is ripe to motivate our educated upper middle class to climb from saving mode to wealth-generation mode..."

"In order to check gold imports, the government has increased the basic customs duty on gold bars from 2 per cent to 4 per cent."
 
The minister further said, "Time is ripe to motivate our educated upper middle class to climb from saving mode to wealth-generation mode. ...
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:rotflmbo:

:noevil:

:doodoo:

:paperbag:
 
...well what can you say, they are waaaay back & trying to catch up with "the greatest & best" economies. The same goes on everywhere - people don't try to be imaginative, especially not politicians. They would follow tried & tested paths. Even when tried & tested, and what has been working in the past (for various reasons), is on the way to destruction - they do not look further than next election cycle.
 
I remember from way back (early 1970s) that there was BIG TIME gold smuggling from Dubai to India. They used to use boats called "dhows", that was the first time I ran into that term.

Gold smuggling will come back if India's .gov cracks down too hard.

Yes, LOL re their asking Indians to save in other ways...
 
benjamen said:
Due to high prices of gold, Indians are starting to turn to silver:
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...yup, and that was my thought, why silver might benefit more from fiat currency depreciation - if the average folk on the street starts waking up to the story.

Gold will be "big boys" toy of choice, where silver, will most probably be a man-on-the-street currency/store of value.

I am getting all excited :)
 
Next attempt: ban the sale of it by banks
http://www.moneycontrol.com/news/cn...in-sales-at-banks-to-clamp-import_722919.html

"The sharp rise in gold imports has the Reserve Bank worried. After clamping down on gold-loan companies, the central bank is now internally debating on banning banks from selling gold coins, reports CNBC-TV18's Gopika Gopakumar.

Akshaya Tritiya may not be auspicious for banks in the future. The Reserve Bank is considering a ban on sale of gold coins by banks to partly curb rising gold imports and because the central bank believes it is not relevant to core banking operations."

:popcorn:
 
Reserve Bank Deputy Governor Subir Gokarn today said there is a need to "dematerialise" gold like any other financial product to reduce its physical imports, the rise of which has been blamed for the high current account deficit that is feared to touch new record high this year.

High gold imports are "creating some macroeconomic stresses and so the challenge is to find ways to replicate the financial characteristics of gold without necessarily causing physical importing," Gokarn told the last day of the two-day annual Bancon conference here.
...
He said while global gold output has stayed stable at around 4,000 tonne per year, the domestic [Indian] consumption of the yellow metal has doubled to 1,000 tonnes annually since 1999, despite a massive rally in the gold price.

"More expensive gold is being imported in larger quantities, which is compounding the trouble," he said.

As gold imports touched a record high last year, pushing up the current account deficit to a historic high of 4.2 per cent in the year, the Reserve Bank has unveiled a slew of curbs on gold purchases and financing.
...
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http://economictimes.indiatimes.com...t-rising-gold-demand/articleshow/17360437.cms

They have already introduced paper gold (etfs), higher taxes and banning loans for gold purchases. What will they think up next?
 
India's record current account deficit is "worrying," Finance Minister P. Chidambaram said on Wednesday, and hinted at cutting gold imports to bolster weak external accounts that have brought back memories of a 1991 currency crisis.
...
He said he was considering reining in imports of gold, used as an investment tool by Indians but which mean a drain on foreign currency reserves.

"We may be left with no choice but to make it a little more expensive to import gold," Chidambaram said. He however, declined to elaborate.
...
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http://gata.org/node/12087
 
... a just released "Report of the Working Group to Study the Issues Related to Gold Imports and Gold Loans by NBFCs" in India, part of a coordinated campaign to minimize Indian gold demand and imports whose direct substitution to "(un)sound money" in the country is one of the reason being attributed for the nation's high current account deficit (as reported earlier) and why the finance minister said "demand for gold must be moderated." The chart shows the staggering eightfold increase in India's gold loans "which monetize the idle gold in the country", in just four short years. In short it proves that in India, gold is the only real money, and is the only fallback option in a country where inflation is still rampant, and where even simple peasants prefer to keep their wealth not in the local paper currency, which has been losing its value aggressively in recent years, but in the shiny metal. Must be "tradition."
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More: http://www.zerohedge.com/news/2013-01-02/dont-show-bernanke-chart-gold-loans-india

Tradition!
 
... what else you could expect from idiot politicians :D. Instead of ENCOURAGING people to invest into something that will survive the coming paper apocalypse, and be the strength for the country, even if in people's hands - the idiots would rather have their people holding on to dollars/other paper reserves. Ttypical, isn't it.

At this point, I really don't suspect anything sensible coming from any of the politicians in the western, or west-influenced governments. They are all under a collective spell of Neo Keynesians.

Truly, it will be up to some of the mentally-independent states, like China or Russia, to change the game eventually.

DSABug, I think that there might be not so much "bubble in", but maybe rather "panic into" precious metals. Which may end up in very very different dynamic, re. popping it. Basically, the very tip might blow off, but the bulk of the final, monster gain, might hold, mid- long term. Effectively, devaluing all other (especially paper) assets against PMs, big big time.

Sent from my Nexus 7 using Tapatalk HD
 
Last edited:
From Jan 8:
As if last year's new regulations from the Indian government had not caused enough turmoil at the local gold markets, tomorrow the Ministry of Finance and the Reserve Bank of India (RBI) will be publishing new regulations aimed at raising gold import taxes to 6%. Gold dealers are appalled at these new measures and argue that the country’s gold market – the second largest in the world – is being unfairly scapegoated in response to weakness in the rupee and the large current account deficit. They and many economists argue that such measures are counterproductive, and show that the Indian government is still too wedded to the kind of market controls that became a hallmark of the country’s socialist economy following independence.

Last year the Indian government quadrupled its gold import taxes from 1% to 4%. This week it is expected to release new plans for raising the rate to 6%. In April last year the RBI instructed all Indian commercial banks to deliver biannual reports on the total volume and financial value of all gold imports by financial institutions, banks, gold trading agencies, import and export companies as well as specific gold and jewellery dealers.

However, such measures have had little impact on Indian demand for physical gold. According to the RBI, the country's gold imports account for approximately 80% of its current account deficit. Therefore, the central bank has once again decided to turn the thumbscrew. Last month India's commercial banks were barred from granting credit for gold purchases.
...
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http://www.goldmoney.com/gold-resea...rnment-to-hike-gold-import-tariffs-again.html
 
...
Though gold is continuing to lure farmers, given the country's propensity to buy gold on most occasions, an increasing number of farmers appear to be gradually moving away from gold to investing in silver and in real estate.
...
As Bachhraj Bamalwa, bullion house owner said, "Pongal is an auspicious occasion for Tamilians and most buy gold to celebrate the occasion, as gold is the symbol of prosperity. Despite a price hike, we have witnessed a growth of around 10% already leading up to the festival. One significant thing that has come to our attention is the sale in silver, which has jumped past gold sales."
...
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http://www.mineweb.com/mineweb/content/en//mineweb-silver-news?oid=169649&sn=Detail
 
Indian banks are struggling to attract deposits to fund credit growth amid the slowest economic growth in a decade as customers buy assets such as gold and real estate to protect themselves against inflation.

The credit-to-deposit ratio at lenders led by State Bank of India widened at the end of last month to almost 79 percent, or the highest since the central bank began reporting the data in 1998. Meanwhile, physical savings including gold imports, which slumped to 45 percent of household assets in the 1990s, may end this month at about 66 percent, Vishal Narnolia, a Mumbai-based analyst at SMC Global Securities Ltd. (GLBS), estimated.

The accelerating flow of funds into gold -- spurred by households seeking to curtail erosion in the value of their savings -- may hinder policy makers’ efforts to bolster growth in Asia’s third-largest economy. New deposits aren’t keeping pace with lending, especially at private-sector banks such as ICICI Bank Ltd. (ICICIBC), according to central bank data, signaling that credit growth may halt.
...
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http://www.bloomberg.com/news/2013-...d-as-gold-lures-deposits-corporate-india.html
 
In yet another crackdown on gold imports, the Reserve Bank of India has proposed a fresh set of measures to be mandated at the end of this month, to curb imports and tighten criteria for banks lending against the yellow metal.

In its Monetary Policy for 2013-14 announced on May 3, the central bank has announced that it will restrict gold import on a consignment basis by banks. Henceforth, the RBI has said, imports will only be considered if they meet the genuine needs of exporters of gold jewellery.
...
The central bank has also put more curbs on lending against gold. Banks would no longer be able to grant advances for the purchase of gold in any form, including primary gold, gold bullion, gold jewellery, gold coins, or units of gold exchange traded funds and units of gold mutual funds.
...
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http://www.mineweb.com/mineweb/content/en//mineweb-gold-news?oid=188825&sn=Detail
 
Sounds like they are getting more and more nervous. If gold becomes a defacto currency against the rupee, they have lost.
 
I also think their central bank answers to the powers that be who run Western central banks.
So all the import controls & letting Goldman Sachs create fractional reserve gold products there could also be about trying to reduce the drain of gold from the West.
 
Anybody want take a swing at guessing how much spot gold moves next week because of this?
 
Aubuy said:
Anybody want take a swing at guessing how much spot gold moves next week because of this?
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I don't think the spot (paper futures market) is going to be affected by this. It might have an impact on demand for physical, but it's not clear if it will curb demand as intended or backfire and increase demand.
 
If I understand correctly India is the largest gold consumer and they are trying very hard to dampen that demand. People have a way of ignoring what their government wants them to do, but I would think "traders" would use the information if they can?
 
Point taken. I would presume the people in India are also still going to want to buy gold regardless of what the government does so demand might not change much. If gold spot price is detached from physical demand at least it's still influenced by world news events like Israel bombing Syria. Seems like the coming week might bring some swings because of the middle east heating up (again).
 
NEW DELHI: Finding gold coins at your neighbourhood bank branch may become tougher. The Reserve Bank of India (RBI) has suggested that banks should not aggressively sell gold products at their branches. This is the latest attempt by the central bank to stem runaway gold imports, one of the key reasons behind the widening trade and current account deficits.

Sources told TOI that the issue was raised during the customary post-monetary policy meeting with bankers on Friday. Separately, RBI is issuing fresh guidelines for banks that provide incentives to executives for crossselling of gold and other financial products, which are seen to be the key reason behind recent allegations of money laundering and other irregularities.

Bankers said that the RBI advisory may not result in a major reduction in gold sales. "If a customer does not find a gold coin at a bank branch, he will go and buy the same product from a jeweller. What can you do about this?" said a bank chief.

What it does indicate is that RBI is unlikely to allow banks to buy back gold coins sold to customers, a key demand for several years. In the absence of permission to buy back the coins, several customers have preferred jewellers to meet their demand.
...
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More: http://timesofindia.indiatimes.com/...-banks-on-gold-sales/articleshow/19905651.cms

They aren't hiding their concerns about public gold buying, that's for sure.
 
Gold imports by India, the world’s largest consumer, are set to exceed 100 metric tons for a second month in May as jewelers rush to beat central bank curbs on overseas bullion purchases by banks, a refiner said.

The biggest slump in gold prices in more than three decades on April 15 spurred banks, traders and jewelers to import more than 100 tons last month, said Rajesh Khosla, managing director of MMTC-PAMP India Pvt. Purchases this month will match April’s imports, he said. ...
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More: http://www.bloomberg.com/news/2013-...seen-topping-100-tons-for-a-second-month.html
 
... India’s wholesale buyers are only receiving a tenth of the gold imports that they have ordered.

According to The Economic Times India article:
Haresh Soni, chairman of the All India Gem and Jewellery Trade Federation, said banks and trading houses importing gold are getting only 10 per cent of their orders as the demand has surged sharply after a sudden slide in gold prices last month. “If they place order for one tonne, for instance, then they are getting only around 100 kg,” Soni said. “Consumers are buying in advance for family weddings scheduled in winter.” Buyers have been swarming to jewellers since last month as gold prices fell 11.5 per cent in a week, from over Rs 29,000 per 10 gm on April 10 to Rs 25,680 on April 17. Since then, the prices have partially recovered to about Rs 27,500 this week.
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Furthermore, many Indian jewellers are expecting gold sales of 30-50% higher during the Akshaya Tritiay holiday (May 13th) compared to last year due to the lower price of gold.
...
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http://srsroccoreport.com/indias-ba...ding-houses-only-receiving-10-of-gold-orders/

Side note - nice to see SRSrocco has his own site now.
 
Gold premiums in India, the world’s biggest buyer, more than doubled on speculation that government restrictions on bullion imports by banks to rein in a record current-account deficit would reduce supplies.

The fees jewelers pay dealers for bars jumped as high as $40 an ounce today from $17 to $18 yesterday, Bachhraj Bamalwa, a director at the All India Gems & Jewellery Trade Federation, said by phone from Kolkata. The Reserve Bank of India on May 13 limited imports by banks on a consignment basis to only those required to meet the genuine needs of exporters.

The biggest slump in prices in three decades last month led to shoppers crowding retail outlets across India to buy jewelry and coins, deepening concern that the nation’s current-account deficit, the broadest measure of trade, would widen from an all-time high. The rush to buy bullion caused a shortage of physical supplies, prompting importers to charge a hefty premium over London prices, according to Bamalwa.

“Banks have refused to deliver any gold except ordered previously, and bullion dealers are not accepting fresh orders,” Bamalwa said. “Whether the bankers and dealers will find another route to import and how they will go about it, it is very unclear.” ...
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More: http://www.bloomberg.com/news/2013-...ump-as-central-bank-curbs-may-cut-supply.html

... GoI and RBI are treating us like addicts. They are hoping that giving us the cold turkey will set things right. But you can never fight human nature. Clampdown on gold will be like the prohibition on liquor in Gujarat. Consumers and smugglers will have the last laugh.
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http://blogs.economictimes.indiatim...vt-rbi-are-again-getting-it-all-wrong-on-gold
 
PLEASE, PLEASE!!! do NOT buy that hideous and expensive metal, it will make your penis fall off!!

Rupees are far, far better.

<sarc>
 
The Reserve Bank of India said on Monday banks would not be allowed to give loans against units of gold exchange-traded funds (ETFs) and gold mutual funds.

As these products are backed by bullion and primary gold, the restriction on grant of loan against gold bullion will be applicable to loan against units of gold ETFs and units of gold mutual funds, the central bank said in a statement.

The RBI also said that while giving loan against gold coins sold by banks, the lenders should ensure that the weight of the coins does not exceed 50 grams per customer.

In a separate statement, the central bank said no advances should be given by non-bank financial companies (NBFCs) against bullion, primary gold and gold coins.

The RBI also said NBFCs should not give loans for the purchase of gold in any form including primary gold, bullion, jewellery, coins, units of gold ETFs and units of gold mutual funds.
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http://www.mineweb.com/mineweb/content/en//mineweb-fast-news?oid=191656&sn=Detail
 
This will be an interesting experiment for a culture that values gold so much. Your local loan shark will be open for business. :redherring:
 
The Reserve Bank today ruled out a ban on sale of gold coins but asked banks to refrain from aggressively selling the precious metal.

RBI Governor D Subbarao told reporters here that the RBI did not intend to ban sale of gold coins by banks.

"We do not want banks to aggressively market gold. We do not want that to become a business. Gold loans are a very small part of the banking business," he said on the sidelines of a financial inclusion conference here.

In a bid to curb demand for gold, the RBI yesterday imposed restrictions on banks and non-banking financial companies for providing loans against gold coins as well as units of gold ETFs and mutual funds.
...
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http://news.outlookindia.com/items.aspx?artid=799277

If they tried to ban sales of physical gold, the country would likely riot.
 
Even as RBI tightens the screws on gold loans in India, banks and mutual fund houses shrug off the new curbs, insisting only minimal impact.
...
Though most bankers agreed the move is aimed at curbing rising demand for the precious metal, mutual fund houses said lending against gold ETFs has not gained widespread appeal in the country. Sundeep Sikka, chief executive, Reliance Capital Asset Management, said with retail investors being the majority of investors coming into these funds, they have not been keen to leverage the product.
...
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http://www.mineweb.com/mineweb/content/en//mineweb-gold-news?oid=192223&sn=Detail
 
I guess they'll have to try to dissuade them a little harder...

May 29 (Bloomberg) --Gold demand in India, the world’s largest buyer, is heading for a quarterly record after prices slumped to a two-year low in April, the World Gold Council said.
India’s gold imports will be 300 to 400 metric tons in the second quarter, almost half total shipments for all of last year, the London-based industry group said in a report.
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http://mobile.bloomberg.com/news/20...ds-for-quarterly-record-after-price-drop.html
 
In what traders termed a near-panic reaction to the sliding Indian rupee, the Reserve Bank of India banned import of gold by domestic consumers through bank credit and has made overseas purchase of the precious metal a cash-and-carry business.

The move will nearly cripple the retail jewellery trade and probably lead to higher smuggling into the country, putting the clock back by nearly two decades when socialistic governments restricted gold imports. A day after P. Chidambaram said that "necessarily we will have to check gold imports," the central bank barred gold importers using letters of credit from banks for gold imports.
...
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More: http://economictimes.indiatimes.com...rts-with-bank-credit/articleshow/20435510.cms
 
All the measures they've tried so far have had very little impact...

Looking at the video Jay posted in the other thread, I can see why. It's like South Africa in that the police are corrupt and are looking for bribes, so it is easy to smuggle. I also think Indians are such entrepreneurial guys not afraid of big risks and hard work. If they have to swim that gold from the sea to city in the sewers they'll do it.
 
My favorite line is from Bernansky saying he doesn't think Gold = Money.

Gold = Asset

What a fucking buffoon!

A limited "asset" on this planet which has been used for centuries as money was just a ruse to get into REAL money like the USD. riiiiiiigggghhhhtttt! :rotflmbo:

So...if I owned all the gold and silver in the world then I'm just holding on to a depreciating asset. Gotcha! :rimshot:

-Q
 
http://www.sprottgroup.com/thoughts/articles/chart-of-the-week-india-declares-war-on-gold/

"The central bank has announced a series of measures over the past month, including restraining lending against gold-backed assets, and restricting gold imports. The hike in gold import duty to 8% this month is the most recent announcement in this drive and doubles the duty that was applied at the beginning of this year.1 The RBI has asked bank trading houses not to import gold on a consignment basis for domestic sales, further insisting on 100% cash margin for letters of credit. The restrictions were invoked after imports soared to 162 tonnes in May from 142 tonnes in April on the back of weak international prices. In their campaign against gold imports the Indian finance minister P. Chidambaram has even urged banks to advise their customers not to invest in gold"

"Gold is synonymous with savings and security for many of India's 1.24 billion people. Only about 36,000 of India's 650,000 villages have a bank branch, which mean the working class hold much of their assets in gold coins and jewelry. Further increasing demand is gold’s cultural significance which makes it essential for weddings and other ceremonies. We suspect that there is very little the RBI can do to supress the consumption of gold and the central bank’s efforts will serve only to push the gold trade underground through smuggling and off-shore trading centres."
 
In return for asking the Indian government to drop the gold import tax back down to 4%, the indian jewelerly federation is banning it's member from selling gold bars or coins (35% of thier business).


http://news.yahoo.com/jewellers-join-governments-campaign-cut-124553983.html

"...82 percent of Indian consumers in a survey said they thought the price of gold would increase or be stable in the next five years."

"Over centuries, Indians have squirreled away at least 20,000 tonnes of gold - more than is stored in the vaults of the U.S. Federal Reserve - in their quest for a safe investment."
 
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