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

pmbug

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Anybody want take a swing at guessing how much spot gold moves next week because of this?
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.
 

Aubuy

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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?
 

Aubuy

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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).
 

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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.
...
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.
 

pmbug

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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. ...
More: http://www.bloomberg.com/news/2013-...seen-topping-100-tons-for-a-second-month.html
 

pmbug

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... 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.
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.
...
http://srsroccoreport.com/indias-ba...ding-houses-only-receiving-10-of-gold-orders/

Side note - nice to see SRSrocco has his own site now.
 

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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.” ...
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.
http://blogs.economictimes.indiatim...vt-rbi-are-again-getting-it-all-wrong-on-gold
 

ancona

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PLEASE, PLEASE!!! do NOT buy that hideous and expensive metal, it will make your penis fall off!!

Rupees are far, far better.

<sarc>
 

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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.
http://www.mineweb.com/mineweb/content/en//mineweb-fast-news?oid=191656&sn=Detail
 

Aubuy

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This will be an interesting experiment for a culture that values gold so much. Your local loan shark will be open for business. :redherring:
 

pmbug

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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.
...
http://news.outlookindia.com/items.aspx?artid=799277

If they tried to ban sales of physical gold, the country would likely riot.
 

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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.
...
http://www.mineweb.com/mineweb/content/en//mineweb-gold-news?oid=192223&sn=Detail
 

Unbeatable

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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.
http://mobile.bloomberg.com/news/20...ds-for-quarterly-record-after-price-drop.html
 

pmbug

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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.
...
More: http://economictimes.indiatimes.com...rts-with-bank-credit/articleshow/20435510.cms
 

Unbeatable

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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.
 

MasterQ

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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
 

benjamen

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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."
 

benjamen

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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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