What evidence could the Indian citizens be looking at
to lose confidence in their own fiat money? Maybe because the their RBI only
holds a scant US$24B in gold - AND much has been swapped (traded) out which
in all likelihood will NEVER be recovered. See IMF statement.
Now then, perhaps those US$ reserves are overwhelming their domestic
consumption? Why not dispense with those lame dollars, add physical gold at
home to their reserves, or do as the Chinese, start buying up natural
In order to manage gold demand in India, the apex bank is to allow banks
to buy back gold coins and impose export obligation on bulk gold importers.
Author: Shivom Seth
Posted: Thursday , 07 Feb 2013
MUMBAI (Mineweb) -
Gold prices are set to soar in India with the Reserve Bank of India limiting
the value and quantum of banks’ gold imports, as a tool to rein in runway
current account deficit.
India's central bank is to consider imposing value and quantity restrictions
on gold imports by banks, which account for 60% of India's imports of the
precious metal. Though ‘extreme conditions' would be necessary for the
crackdown, the apex bank is clearly gunning for gold brought into the
India is the world’s biggest gold consumer. It imported 1,080 tonne last
fiscal, 56% of that through banks.
A working group of the central bank has said that a combination of demand
reduction and supply management steps and measures to increase monetisation
of idle stocks of gold would soon be put in place.
This is expected to make gold costly, say analysts. The group has also noted
the need to impose export obligations on bulk gold importers. Banks are among
the chief importers.
To reduce the demand for gold imports and recycle the domestically available
gold, estimated at around 18,000-20,000 tonne, banks have been allowed to buy
back gold coins from the public by offering buy sell quotes.
Banks would also be allowed to use the futures markets to hedge risks in bulk
gold purchases. To contain gold demand, the group recommended differential
pricing of banking services and finance for gold imports.
These could include stipulation of high cash margin on opening letter of
credit for the import of gold and an imposition of surcharge on interest on
gold metal loans to domestic jewellery manufacturers.
The apex bank is also keen to introduce gold linked financial instruments to
divert the savings of inflation wary Indians from gold bars and coins into
Though just last month, the Indian government upped customs duty to 6% on
gold imports, the bank has declared that it would review import duties from
time to time, in a clear signal that it wants to dissuade gold imports
Analysts have termed the proposed restrictions a desperate attempt by the
regulator, that would merely drive up gold prices without curbing imports.
They add that the underlying demand is not dependent on cost considerations
and that gold imports could be diverted from banks to illegal channels.